According to Matthew Sigel of VanEck, a spate of miner bankruptcy might continue to keep bitcoin under pressure in the first three months of 2023. However, he anticipated a return of bullish sentiment in the second part of the year.
Following the publication of the U.S. inflation report on Tuesday, which affirmed the anticipated slowing of the Federal Reserve’s liquidity tightening, the prognosis for risk assets appears to be positive.
However, according to financial giant VanEck, Bitcoin (BTC) may continue to be subject to selling pressure since some miners are anticipated to go bankrupt, which will overshadow the improving macroeconomic conditions.
“Bitcoin will test $10,000-$12,000 in Q1 amid a wave of miner bankruptcies, which will mark the low point of the crypto winter,” Matthew Sigel, head of digital assets research at VanEck, said in the 2023 outlook. Sigel was speaking about the price of bitcoin. “Bitcoin will test $10,000-$12,000 in Q1 amid a wave of miner bankruptcies,” Sigel said.
Bitcoin miners, also known as the people responsible for the production of coins, have found themselves in a difficult position this year as a result of declining prices and increased operational costs.
Given that miners are rewarded in bitcoin for solving difficult mathematical puzzles and verifying transactions on the blockchain, their profitability is strongly correlated to the price of bitcoin. The incentives that are obtained are frequently sold in order to cover operating expenses.
As a result, when the price crashes, as it did this year by 61%, it leads to miner capitulation, which is a situation in which weak miners abandon the market, selling their reserves, which causes the price to drop even further. In the absolute worst instance, the submission could start a downward spiral that ends in death.
Miners have been selling off their coin reserves in an effort to mitigate the negative effects of the current market conditions. Since July, the balance that has been stored in miner wallets has decreased by more than 25,000 BTC (US$444 million), reaching a 14-month low of 1.818 million BTC, according to data that has been recorded by the blockchain analytics firm Glassnode.
It’s possible that this pattern will continue, given that the vast majority of mining businesses are losing money.
“Nearly all of the companies that make up the MVIS Global Digital Assets Mining Index are losing cash and selling at prices that are far lower than their book value. As a result, the index’s median market cap has dropped to only $180 million. Given recent increases in the cost of electricity and recent decreases in the price of bitcoin, we anticipate that a great number of miners will either reorganise themselves or merge in order to remain profitable “Sigel stated.
From the all-time high of $69,000 reached in November 2021, which was registered in November 2021, a decline to $12,000 would represent an 82% fall. The past two bear markets ceased their downward momentum at approximately an 85% fall from their respective all-time highs.
In the second half of 2023, Sigel forecasts that the price of bitcoin will recover to $30,000.
“Lower inflation, easing energy concerns, a possible truce in Ukraine, and a turnaround in M2 supply will power the start of a new bull market,” noted Sigel, who added that an oil-exporting nation would add the cryptocurrency to its sovereign wealth fund. “The start of a new bull market will be powered by the beginning of a new bull market.”
Additional important projections
In addition to this, VanEck anticipates that financial institutions will tokenize more than $10 billion in off-chain assets and a new decentralised stablecoin before the market size reaches $1 billion.
The investment giant also predicts that Brazil will become one of the most crypto-friendly countries in the world and will tokenize a portion of sovereign debt offerings on blockchain. In the United States, Ripple will lose the lawsuit brought against it by the Securities and Exchange Commission, and Ethereum will enable withdrawals from the Beacon Chain.