Bitcoin stayed just above $20,000 on Wednesday, with its inability to gain upward traction fueling concern among analysts of further declines.
The largest cryptocurrency was little changed, bound in a range between about $20,130 and $20,429. The MVIS CryptoCompare Digital Assets 100 index, which measures 100 of the top tokens, fell 2.1 per cent.
"Most short-term technicals point to an above-average chance of a final 'washout'-style decline before this bottoms," said Mark Newton, technical strategist at Fundstrat, in a note Tuesday. "The initial warning should occur on a daily close under $20,491, while under $19,744 allows for a pullback to retest $17,592. Technically not much lies under $17,592 before $12,500 to $13,000, which I expect should be an excellent place for intermediate-term buyers to add to longs."
Bitcoin has been sinking along with riskier assets in recent months, so a slide on a day of tech-stock declines is par for the course. Crypto markets have also been bludgeoned by the meltdown of the Terra/Luna ecosystem, trouble at hedge fund Three Arrows Capital and frozen withdrawals at places like Celsius, as well as job-cut announcements from the likes of Crypto.com, Coinbase and BlockFi.
The crypto industry must be relieved that prices have steadied out "given the stream of negative headlines over the last couple of months," said Craig Erlam, senior market analyst at Oanda. "I fear more may follow in the weeks ahead and I wonder whether the community does too, given its inability to get any traction above $20,000."
Still, any further dips might create a good chance to buy, Fundstrat said.
"Look to buy dips within two to three weeks at lower levels," Newton said, "and any move down to test or briefly undercut June lows presents an opportunity."
Bitcoin miners cashing out?
Bitcoin miners have been forced to tap into their cryptocurrency stashes as a plunge in prices, rising energy costs and increased competition bite into profitability.
The number of coins miners are sending to crypto exchanges has been steadily climbing since June 7, researchers at MacroHive noted, in a sign that "miners have been increasingly liquidating their coins on exchanges." Several publicly listed bitcoin miners collectively sold more than 100 per cent of their entire output in May as the value of bitcoin tumbled 45%, an analysis by Arcane Research found.
"The plummeting profitability of mining forced these miners to increase their selling rate to more than 100% of their output in May. The conditions have worsened in June, meaning they are likely selling even more," said Arcane analyst Jaran Mellerud.
Bitcoin miners, who run networks of computers to earn tokens by validating transactions on the blockchain, are typically staunch crypto "HODLers" and collectively own around 800,000 bitcoins, according to CoinMetrics data.
The crypto mining space rapidly expanded in 2021 as bitcoin more than quadrupled in value, but this growth has further pressured margins as the process is designed to grow more difficult as the number of miners increases.
"Over the past six months, hash rate and mining difficulty have increased while the price of bitcoin has dropped. These are both negatives for existing miners as both work to compress margins," said Joe Burnett, analyst at bitcoin mining firm Blockware Solutions.