Bitcoin’s price nightmare continues as major crypto VC firm implodes
Three Arrows Capital, a crypto hedge fund valued at AUD$14B (US$10B), is facing major liquidation issues resulting in increased market instability.
- Bitcoin's share of the digital asset market has slipped to 42.5% after having risen to a relative high of 47% recently.
- The total capitalisation of the crypto sector has dipped to AUD$1.3T (US$932B).
- Experts believe that Bitcoin is currently "heavily oversold", thereby presenting them with lucrative buying opportunities.
After having forged a minor recovery and found support above AUD$32,000 on 16 June, Bitcoin has once again been gripped by bearish pressure. The digital asset is currently down -8.5% over the last 24 hours and is trading at AUD$29,111.
BTC's ongoing price descent comes as traditional markets — including equities and commodities — have continued to witness massive sell-offs. For example, prominent indices such as the S&P 500, Nasdaq Composite and NYSE have all registered losses of 3.25%, 4% and 3% respectively since yesterday.
The general financial outlook of the digital asset ecosystem continues to look bleak with the recent downturn having been sparked by the destruction of the Terra network (previously LUNA, now LUNC). The situation has been further compounded by US$10B-valued Singapore-based crypto venture capital firm Three Arrows Capital (3AC) being faced with capital insolvency issues.
Analysts noted that Bitcoin is currently holding ground around its 200 weekly moving average (WMA), a popular indicator that traders use to help identify long-term changes in the direction of an asset. If this continues, the digital currency could enter into a "consolidation phase" which could potentially last until December.
If such a scenario is witnessed, pundits believe that investors should refrain from acquiring Bitcoin immediately since many similar phases have played out in the past, presenting users with lucrative hodl opportunities at highly discounted rates.
More pain ahead for Bitcoin?
As a growing list of established crypto projects and digital asset investment companies continue to implode on an almost weekly basis, there is a chance that the ongoing bear market may become prolonged. As per a Twitter poll conducted on 15 June, more than 40% of all global investors who participated believe that Bitcoin will find its local bottom somewhere between the AUD$24K–$28.5K (US$17K–$20K) range – that is 5% to 10% below its current price levels.
That said, some experts believe that Bitcoin may currently be severely undervalued. Jurrien Timmer, director of global macro at Fidelity, noted that Bitcoin's Price/Earnings (P/E) ratio — a metric used for valuing assets so as to find out whether they are overvalued or undervalued — is currently hovering around its 2017 and 2013 levels (time periods when the market was extremely bullish).
Timmer further pointed out that BTC is priced well below its fair market value with the Bitcoin dormancy flow indicator — a tool indicating how oversold the currency is — sitting at levels that have not been witnessed in over a decade.
Disclosure: The author owns a range of cryptocurrencies at the time of writing
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