GB Market Commentary 21/01/2022
by Marcus Sotiriou
Yesterday was a roller-coaster ride for Bitcoin and the crypto markets. In the morning, news was released about Russia’s central bank proposing to ban Bitcoin mining, and crypto.com experiencing a hack worth £34 million of Bitcoin and Ether. Bitcoin was unphased by this news though, as it rallied to $43.4k, whilst positive catalysts for the NFT market were released, with Facebook, Instagram and Twitter joining the NFT space. The stock market then fell dramatically for the rest of the day, hence causing Bitcoin to plunge to a new recent low of $38,200, with $700 million in liquidations. Over the coming days we will see just how much demand there is below and around the $40k support, which is a critical and decisive level.
It is important to note that the crypto fear and greed index remains in extreme levels of fear – this usually represents a buying opportunity. Also, on-chain metrics continue to be bullish, as net Unrealized Profit/Loss (NUPL), which shows the magnitude of Bitcoin holder unrealized profit and loss, as a proportion of the Market Cap. is currently trading at 0.43, the lowest level of network profitability since July 2021. This emphasises the fear surrounding the market now, as many are capitulating at a loss. These metrics suggest that Bitcoin is undervalued at current price levels due to what has happened in previous episodes of extreme fear.
The news about Russia potentially banning crypto mining is significant considering Russia’s crypto trading volume last year was reportedly $5 billion, and a ban will heavily impact this. I do not think they will be able to completely stop crypto trading activity in Russia though. We have seen China attempt to ban crypto trading multiple times over the past few years, yet China remains one of the most active countries for crypto - decentralised finance which is enabled by cryptocurrencies is hard to monitor/stop.
Facebook and Instagram are reportedly exploring plans to allow trading of NFTs on their platforms, which would significantly accelerate adoption, whilst Twitter announced they are launching an NFT profile display option. This means that users will be able to show off their NFTs in a more certifiable capacity, because the image will be linked to OpenSea’s ownership data. That could also limit unauthorized NFT use, as people who don’t own the image won’t get the new hexagonal logo. These companies entering the NFT industry is the biggest step yet towards mainstream adoption and solidifies any existing controversy surrounding the asset.