In the past few days, the digital currency market has seen a significant slump. The total crypto market cap is currently $1.03 trillion. Bitcoin is valued at $22,406 at the time of writing this article. In the last seven days, there have been cumulative price losses of around 4.6%. The month of March did not start well. Miles Deutscher, a renowned crypto influencer, has now identified five stress factors that could affect the digital currency market and, with a market dominance of over 40%, Bitcoin in particular in the coming weeks.
There are 5 major crypto headwinds alarming the market right now.
• Mt. Gox 142,000 $BTC unlock
• Shanghai upgrade $ETH withdrawals
• Silvergate collapse
• Macroeconomic shift
• Regulatory crypto clamp down
: Here’s how each headwind will affect the market.
— Miles Deutscher (@milesdeutscher) March 3, 2023
1. Mt Gox Unlock for Bitcoin
In the early days of Bitcoin, Mt.Gox was the largest crypto exchange, processing around 60 percent of BTC trades in 2013. However, several scandals caused Mt.Gox to file for bankruptcy in Japan in 2014. In particular, a hacker attack and embezzlement by insiders are said to have been responsible. Since the bankruptcy, Nobuaki Kobayashi has managed the remaining approximately 140,000 BTC on behalf of creditors. Some market observers are now worried that the unlocking of the BTC could have a major impact on the market. However, the daily trading volume of the crypto market is significantly higher than the value of Mt.Gox bitcoins.
Repayments will start from March 10th and will continue until the September 30th deadline. Eight years after the hack, a dump could possibly be favored. As of now, it is almost impossible to predict the exact impact. However, with a daily significantly higher trading volume in the Bitcoin market, the effects should remain manageable.
2. Shanghai upgrade on Ethereum network
Miles Deutscher sees the Shanghai upgrade as a fundamentally bullish catalyst to boost demand for ETH in the medium term. Nevertheless, one could expect increasing selling pressure in the short term, although this should also remain manageable. More FUD than a real, well-founded concern seems to be unsettling the community at the moment.
“Based on my analysis of the above calculations + my own intuition, I don’t anticipate the sell pressure drastically overwhelming demand. It’s likely the market prices in the impact via a pre-selloff. Nonetheless, I’m keeping a close eye on how the market reacts.”
In September 2022, the Ethereum network switched the consensus protocol from Proof-of-Work to Proof-of-Stake with the long-awaited Mergen. With the upcoming Shanghai upgrade, it will finally be possible to withdraw staked ETH again. However, some crypto investors have raised concerns that a sudden surge in supply could dump the price. The planned date for the Shanghai upgrade has now been pushed back from March to April.
The hard fork also includes a relevant unlock limit that only unlocks 6 validators per epoch. That means potential selling pressure of less than $70 million based on current prices. However, the daily trading volume of the crypto market is around 100 times higher – again, the market should be able to easily absorb such pressure.
3. Possible bankruptcy of Silvergate Bank
The third drag, which could hardly be more timely, is Silvergate Bank, which has positioned itself as one of the top crypto banks in the US. Silvergate was the first regulated bank to establish a type of crypto payments network that has become a major fiat on-ramp. Now, however, Silvergate Bank is in trouble, which also stems from close ties to SBF and FTX.
The bank is currently examining internally how market developments will affect the future viability of the company and whether it is possible to continue business – there is a risk of insolvency, especially with regard to business and regulatory challenges. Many major crypto companies, including Circle, Paxos, Gemini, Coinbase, Crypto.com, and Bitstamp, have already severed their ties.
4. Macroeconomic development
The macroeconomic stress factors also continue to play a significant role for the digital currency market, although the development decoupled from the stock market in the past week. Macroeconomic data, notably the robust US economy and stubborn inflation, make further monetary tightening likely. According to futures data, a further increase with four interest rate steps would become the basic scenario. 13% of market participants expect the key interest rate to rise above 6%, while this scenario was not even factored in about a month ago.
Miles Deutscher thus advises a careful analysis of inflation data and the probabilities of Fed monetary policy:
“Crypto doesn’t exist in a vacuum. Macroeconomic conditions have been the driver behind the majority of crypto’s price action for years. So keep your eye on the CPI data on March 14th, which will influence the FED’s decision on the 22nd.”
5. Crypto Regulation in the US
Last but not least, the crypto influencer rightly identifies crypto regulation as a kind of sword of Damocles currently hovering over Bitcoin & Co. Most recently, the US Securities and Exchange Commission (SEC) stepped up its fight against crypto service providers such as Kraken or Paxos. While long-term regulation also offers advantages for cryptocurrencies, in the short term it depends on the concrete implementation. A “regulation by enforcement”, as currently preferred by SEC boss Gary Gensler, tends to inhibit innovation rather than offering consumer protection.
Two crypto presales with hype potential in March 2023
Those looking to invest in new cryptocurrencies with 10x potential could also build exposure to presales in March 2023. These two coins offer an attractive CRV.
Fight Out (FGHT): Move-2-Earn cryptocurrency, which combines high-end gyms with an innovative metaverse. Here athletes can earn rewards with activity and benefit from individualized training plans. In the presale there are up to 67% more tokens as a bonus.
C+Charge (CCHG): Eco-friendly cryptocurrency creates a new ecosystem that unifies payments in the EV charging network, simplifies monitoring and incentivizes e-mobility. Everything is done via an intuitive Web3 app and the CCHG token.
Author: Daniel Robrecht
After studying law and management, Daniel decided to work as a freelance author and has been writing qualitative publications on various specialist topics for around 10 years now. As an investor, he gained years of experience with stocks & cryptocurrencies. In addition to a long-term investment approach, Daniel is also passionate about short-term markets. Through targeted further training at international universities, he has acquired extensive knowledge about the capital markets, stocks, cryptocurrencies and decentralized finance. Daniel’s primary focus is on general market trends, exciting stocks, business news and the digital currency market. In his private life, too, there is never a day without the financial markets. As an author, Daniel writes for leading German-language publications in this field. Daniel publishes for Finanzen.net, among others, Business2Communityand FXStreet.de. Daniel on LinkedIn.
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