Research Report

Brutal Attack on Bitcoin Continues, BTC Price Could Crash to $25,000 if Institutions Fail to Defend These Levels!

Written by: Sahana Vibhute

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Sahana Vibhute

A passionate cryptocurrency and blockchain author qualified to cover every event in the crypto space. Researching minute occurrences and bringing new insights lie within the prime focus of my task.

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May 8, 2022

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Bitcoin, the star crypto which has a decade long history, just came into the limelight a couple of years ago. It was when the strength of fiat currency was weakening due to the turbulence caused by the prolonged pandemic situation across the globe. People just jumped into the crypto space to save their hard-earned money and this was when the BTC price just jumped from just $10,000 to as high as $69,000 within a short time. 

Yet to curb the Bitcoin inflation, a correction was much required but currently, when the BTC price is more than 50% below its ATH, people believe the asset may plunge more than 20% again!

Interesting, Isn’t it? But the question is will it drop so heavily and moreover, will they allow to drop so hard? And above all if it drops what may happen next? Let’s see!

The swelling Crypto ecosystem has no doubt attracted huge traders from all caste and creeds but also compelled huge institutions to step in. Some Wall-Street bets tried their luck in crypto, while some Wall-Street companies began acquiring Bitcoin. This was when Bitcoin experienced a massive bull run. However, for the past 6 months, the prices are falling apart and finding new lows constantly. 

Now When the Bitcoin price has already plunged hard from $69,000 to $36,000 at the press time, the bears may now aim to drag the price below $32,000. Once these support levels are broken, BTC’s price may easily tremble down below $30,000. 

And this is when the panic selling may lead to yet another massive leg down towards $25,000. But what about the institutions or giant whales who acquired Bitcoin at a lower price then, which are now break even?

Average Buy- The Strong Support for the BTC Price

The top institutions which hold huge BTC reserves are namely MicroStratergy, Luna Foundation Gaurd & Tesla. After the recent acquisition of these companies, the current holdings are as follows,

  • MicroStratergy: Approximately 125,051 Bitcoins worth more than $3.8 billion at an average price of $30,700
  • Tesla: 43,200 BTC worth nearly $2 billion at an average price of $32,600

It is important to note that the BTC price is slowly heading towards the average price and further if the price keeps on sliding beyond the base price then the institution may face a margin call. With the break-even prices, the liquidations may get automated or else to avoid liquidations, more collateral is required to be added. On the contrary, the institutions can buy more BTC at a discounted price to back the plummeting BTC reserves. 

In a recent interview, the CFO of MicroStratergy Phong Le explained the company’s Q1 2022 earnings call, said that if Bitcoin price falls below $21,000 or 50% below the current levels, then it may accumulate more cryptocurrency to back the $205 million Bitcoin-collateralized loan with Silvergate Bank. This loan was utilized in buying more Bitcoin. 

“As you can see, we mentioned previously we have quite a bit of uncollateralized Bitcoin. So we have more that we could contribute in the case that we have a lot of downward volatility. But again, we’re talking about $21,000 before we get to a point where there needs to be more margin or more collateral contributors. So I think we’re in a pretty comfortable place where we are right now,” he said. 

On the other hand, Luna Foundation Gaurd intends to accumulate more and more Bitcoins as they are on the path to become the highest Bitcoin holders. And hence the interim drop may not impact them either. Therefore, as the price plunges close to the average price, then then a significant buying volume may be influx which may stabalize the selling pressure. Therefore compelling the price to consolidate.

 In a bullish case, if the price receives significant momentum, then the FOMO fear may attract new strong hands. This may eventually uplift the price and assist to sustain the price above the average levels. So if the extreme price drop has merely impacted the large holders who have not liquidated a single BTC yet, then who may be badly impacted?

BTC Price & Short-Term Holders

As per the data from intotheblock, an analytical platform, Bitcoin has the single largest whale holding nearly 1.20% of the whole circulation supply. And interestingly, the whale is extremely active and hence the market may remain pretty volatile for more time. Now considering the holders, Bitcoin has a very large share in the long term holders who hold the addresses hold nearly 58.26% of the supply at the press time. 

On the other hand, the addresses that held BTC from 1 month to a year account more than 34% and the addresses holding less than a month(Crusiers) hold only 7.40%. The historical evolution of the holdings displays the panic selling among the short-term holders. The short-term holders just dump with a slight drop in BTC price, dragging the price much lower. While at the same time the long and the Crusier’s kept on swelling. 

btclongholders

But the price slash during the start of the month displayed a diverse trend as the short-term holders swelled to some extent, despite the price slash. But as the asset sliced down below $45,000, these holders quickly shed off their holdings compelling the price to hit $36,000. However, during the recent slash, another 2% to 3% of the short-term addresses may have been liquidated. But long term and cruiser’s hold strong indicating a stabilized rally could begin at the earliest. 

Summing up, the Bitcoin price now appears to have fallen prey to panic selling of the short-term sellers. And hence as far as the long-term holders and the institutions hold Bitcoin, the price may eventually not hit levels below $28,000. However, as some market analysts predict the price may eventually hit $30,000 but it may be only for a short time frame. And later a strong uptrend may prevail. 

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Sahana Vibhute

A passionate cryptocurrency and blockchain author qualified to cover every event in the crypto space. Researching minute occurrences and bringing new insights lie within the prime focus of my task.
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