4 Crucial Events That Will Make or Break Bitcoin Price Action

4 Crucial Events That Will Make or Break Bitcoin Price Action

Key Insights

  • The US government will be selling 50,000 BTC over the year, causing selling pressure
  • According to surveys, the likelihood of a US recession this year is at 60%. This may do well to fuel the price of Bitcoin
  • The series of bank runs in March caused investors to look to other safe-haven assets like gold, putting pressure on cryptocurrencies
  • Governmental crackdowns against corporations like Binance, Coinbase, Bittrex and Ripple Labs among others, can cause selling pressure on BTC

Bitcoin is currently the largest cryptocurrency in the world by market cap. With a market cap of $571 billion from the global crypto market's $1.257 trillion, Bitcoin has a dominance of 45.4% in the market.

This means that Bitcoin contributes so much to the global crypto market cap, that it holds almost half of the entire ecosystem up.

The price action of cryptocurrencies across the market is also largely controlled by that of Bitcoin. This means that if Bitcoin does well, then there's a better chance that the other cryptocurrencies also perform well.

Because of its influence, Bitcoin is one of the most monitored cryptocurrencies in the market and is even regarded by some as a metric on its own.

In this article, we examine 4 crucial events that might make or break the price action of Bitcoin over the coming weeks, months and even the rest of the year.

1) Pressure As The US Government Sells Bitcoin

After starting the year on a less-than-optimal note of around $17,000, Bitcoin started to rise steadily, until it hit the $25,000 zone. However, the series of bank runs in March soon brought the cryptocurrency to its knees below $20,000.

In less than a week, Bitcoin broke again above $20,000, starting a rally that ultimately took it to the $29,000 – $30,000 zone where it now sits.

This short history of Bitcoin over the year only goes to show the cryptocurrency's resilience against adverse conditions.

Unfortunately, however, the "adverse conditions" may be far from over.

It now appears that the US government may be selling off some of its crypto holdings over the coming months.

According to a court document, the US government sold 9,861.17 Bitcoin (BTC) for close to $216 million on March 14.

The 50,000 BTC that were seized in November as a result of James Zhong's arrest after he pled guilty to wire fraud for allegedly manipulating the darknet market Silk Road in 2012 were also included in the Bitcoin that was sold.

The US government has even called this Bitcoin seizure one of the biggest cryptocurrency seizures in history.

However, the document also mentions that the remaining 41,490 Bitcoins will be liquidated by the government throughout this year in four instalments, according to the document.

The dates of these sales are:

  • 26 May 2023
  • 7 August 2023
  • 19 October 2023
  • 30 December 2023

As a side note, here's something interesting:

<em>Chart showing the US government's Bitcoin sales | <span style=
Chart showing the US government's Bitcoin sales |
Source: CryptoQuant"/>

If we divide the number of days in a year by the number of batches, we get 73 days, which is exactly the day the first batch was sold.

It makes one wonder if there will there be a pattern in the sale of the remaining batches every 73 days.

2) A Coming Recession May be Fueling Bitcoin

According to surveys, the likelihood of a US recession this year is at 60%, and CPI statistics show that inflation has just started to decline after reaching a record high of 40 years.

The US Federal Reserve's growth projections also indicate a dramatic decline in the US economy this year, with the fourth quarter growth expected to be just 0.4%.

This might go a long way to fuel Bitcoin's price, seeing as the cryptocurrency was created just for this.

The US's Great Recession from December 2007–June 2009 served as the incubator for Bitcoin's creation.

The mysterious founder(s) of Bitcoin was successful in developing a non-fungible store of value that is not bound by any sovereign state.

This means that in the event of this impending recession or inflation, Bitcoin may be used as a hedging mechanism, a store of value, and a way to escape the adverse effects of negative economic conditions.

In addition to macro trends, Bitcoin can be used to escape several adverse economic conditions including regulation, environmental concerns, government mining bans, shifts in institutional acceptance, and others.

3) Bank Runs

The recent failure of Silicon Valley Bank caused anxiety in the banking sector by highlighting the weaknesses of interdependent financial institutions and exposing the wide-ranging consequences of bank contagion.

In March, depositors rushed to withdraw their money from the SVB and the others, causing a massive Bank run that negatively impacted the price of Bitcoin.

Silvergate was forced to sell $5.2 billion in debt instruments at a significant loss after the bank's total deposits fell from $11.9 billion at the end of the third quarter of 2022 to barely $3.8 billion.

The Federal Deposit Insurance Corporation (FDIC) stated it was taking Silicon Valley Bank (SVB) just two days after Silvergate announced it was closing its doors. As of the end of 2022, SVB has $175 billion in deposits and around $209 billion in total assets.

<em>Chart showing the rise in deposit withdrawals after March's bank run | <span style=
Chart showing the rise in deposit withdrawals after March's bank run |
Source: FRED"/>

The frequency of withdrawals escalated dramatically from March, as seen in the figure above, and some forecasts suggest that the overall amount of withdrawals was enormous.

And although Circle Internet Finance (issuers of USDC) claimed to have $3.3 billion in reserves at Silicon Valley Bank, alarmed investors dumped more than $2 billion of the stablecoin USD Coin.

On March 13, the price of USDC, which was intended to trade at $1, fell below 87 cents due to selling pressure.

This decline in the regional banking index is probably the result of increased investor uncertainty and risk aversion, since they may be concerned about the wider ramifications of the bank's bankruptcy.

As a result, many investors are looking to safe-haven assets like gold, which is frequently seen as a value store during difficult economic times.

It makes one wonder how much further the banking crisis will escalate, and what these conditions have in store for Bitcoin.

4) Governmental Crackdowns

Asserting "many breaches of the Commodities Exchange Act (CEA) and CFTC rules," the Commodity Futures Trading Commission (CTFC) filed a complaint on March 27 against cryptocurrency exchange Binance, CEO Changpeng Zhao, and former compliance officer Samuel Lim.

The CFTC alleges in the lawsuit that Binance gave users access to derivatives that had to be traded on regulated platforms while failing to properly register with US regulators.

Many more reports even indicate that prominent cryptocurrency exchange Coinbase may be the next big target for American regulators.

On March 22, Coinbase disclosed that the U.S. Securities and Exchange Commission (SEC) had sent it a Wells notice informing it that it intended to initiate enforcement action against the business.

Although Coinbase stated in a statement that the company is "confident in the legitimacy of our assets and services," the SEC stated that it believes Coinbase breached investor protection regulations.

This and several other governmental agency crackdowns on crypto and crypto-related corporations like Coinbase, Binance and even Bittrex have created an aura of uncertainty around investors.

This leads us to wonder what the effects of these crackdowns will have on Bitcoin in the coming months.

Disclaimer: Voice of Crypto aims to deliver accurate and up-to-date information, but it will not be responsible for any missing facts or inaccurate information. Cryptocurrencies are highly volatile financial assets, so research and make your own financial decisions.

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