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Business News/ Markets / Cryptocurrency/  Bitcoin struggles to breathe over $19k as markets bleed. How steep is the trouble of this crypto

The crypto market on Thursday extended its losses as many major cryptocurrencies were in a bloodbath. Leader of the market, Bitcoin took a massive beating, erasing its $ 20,000 mark and even further struggling to barely stay afloat over the $19,000 level. Bitcoin's dominance has dipped as investors maintained a panic selling after the recent liquidation of crypto hedge fund, Three Arrows Capital (3AC).

3AC is the new casualty of the crypto market crash following the infamous collapse of Terra sisters UST and Luna that wiped out investors' wealth to zero levels. This has affected investors' confidence in the digital currency market.

As per CoinMarketCap, the crypto market cap crashed by 4.29% over the last day and was trading around $859.31 billion. Bitcoin's dominance dipped 0.19% to 42.46% over the day.

Bitcoin is trading at $19,119.46 down by 4.2%. Its market cap was around $366.70 billion. Counterpart Ethereum slipped nearly 6% and was around $1,040.

Bitcoin's weekly drop was around 6%.

According to Coingecko, Bitcoin dropped by nearly 15% in 14 days, while in a month, the decline was around 39.5%. In a year, Bitcoin has slumped nearly 47%.

From its all-time high of $68,789.63 on November 10, 2021, Bitcoin has plunged by more than 72% so far.

Bitcoin is expected to reach the $ 14,000 mark. But the problem of Bitcoin is deeper than one can imagine. 

On the current market performance, spokesperson at WazirX Trade Desk said, "Bitcoin had dipped below $20K momentarily yesterday, before recovering back. The crypto markets remained largely unfazed by the recent liquidation of the crypto hedge fund, Three Arrows Capital(3AC). The market sentiment has not changed much either, remaining deep in the “extreme fear" zone. On the hourly time frame, the BTC trend has formed a channel pattern, consolidating between $20K and $22K. The daily RSI is hovering around the 25 levels, reeling in the oversold zone. The next key support is expected at $14,000."

Notably, the spokesperson pointed out that Request Network(REQ), an Ethereum-based decentralized payment system, surged over 50% in the last 24 hours, considerably outperforming Bitcoin over that same period.

Last week, on June 23, Amanjot Malhotra, the India-Head at cryptocurrency exchange Bitay Global, through his Twitter account revealed 10 problems that Bitcoin is facing right now. These are:

1. Bitcoin has no wash sale trading rule. Simply put, people can just sell their Bitcoin and buy it again and that's not the case with stocks so once the loophole gets closed - Bitcoin's price will become more stable.

2. Leverage Trading. There are over 520 unregulated exchanges that offer 20x leverage and that means bitcoin's price is extremely sensitive to any movements so once those exchanges become regulated and the leverage comes down the more stable bitcoin's price will be.

3. Number of cryptocurrencies in the market. There are over 19 000 crypto coins out there that are interconnected and cross-collateralized with bitcoin and not all those projects are played by the Rules. Thereby, when some of the big cryptocurrencies collapse, it affects Bitcoin's price as well.

As per CoinMarketCap data, as of now, there are somewhat 20,069 cryptocurrencies and 513 exchanges.

4. Stability of the CeFi/DeFi. These CeFi/DeFis that act as big banks can sometimes become unstable especially when they freeze withdrawals which impacts Bitcoin's price heavily. So, as they become bigger and more mature and are regulated better, Bitcoin's price will become more stable.

5. There is no official stablecoin yet. According to Amanjot, USDC and USDT are not real stablecoins in the sense that it does not give the market confidence, especially after the luna fiasco.

"Our parents don't want to put their money in stablecoins because they don't know if it's going to lose 90 of its value overnight or not. So the upcoming CBDC from the Government will actually be super helpful in giving maturity to the space," Amanjot added.

6. Bitcoin does not have a spot ETF which means as per the Bitay official that "our parent's retirement money which is trillions of dollars is something the crypto space does not have access to unlike traditional assets do."

7. Lack of insurance in cryptocurrencies. Cryptos do not have any insurance protection like banks do with the Central Banks because if you were to bank with a bank that collapsed you would be protected up to a hundred thousand dollars in cash and stocks.

8. All over the world the governments are regulating and taxing Crypto Transactions. Indian government just released their detailed plan about the 1% TDS On crypto transactions.

Amanjot said, "Almost all governments are doing something different in terms of taxation and accounting which is making it difficult for the Institutions/users to manage their own books. Which discouraged them from further investing in Bitcoin."

9. There is still a need for more clarification from the Regulators with regards to what securities are and how can investors invest in them in a safer way.

10. Bitcoin is still not ESG compliant but with each passing year - bitcoin becomes greener and more energy-efficient which becomes harder to criticize for being wasteful.

"10 reasons that have nothing to do with bitcoin's price that's gonna change the game in the next 5-10 years but these problems are not going to work themselves out in the next few weeks or few months this is gonna take a while that's why it's more important than ever that," the Bitay India head said.

He also said, "We dollar cost average into bitcoin because the four-year moving average on bitcoin is 21 685 so right now we are in a very rare but brief period of time where bitcoin is trading at those levels now."

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Updated: 30 Jun 2022, 10:16 PM IST
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