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Bitcoin,  Markets Report

Markets Report: Bitcoin recovers from $29K dip; anger at double spend claim

Troubled times for bitcoin as miner outflows combine with false rumors that the blockchain was compromised for the first time in history

Bitcoin stayed lower on Jan. 22 as fresh data and fresh rumors added bearish sentiment to the market. 

Data from price trackers including CoinMarketCap and TradingView showed a problematic 24 hours for bitcoin, which looks to end the week in a decidedly more precarious position than that in which it began on Monday.

A whirlwind of hearsay takes Bitcoin below $30,000

It’s been another long week for bitcoin traders. A lot has happened in five days, with narratives coming and going in an attempt to explain price volatility which even managed to take BTC/USD below $30,000.

Monday set the tone for the majority of the week’s trading, with bitcoin ranging in a wide $10,000 corridor without finding the support to take it back near or above $40,000. At the same time, $30,000 seemed safe, as markets waited for confirmation of the macro tone following U.S. President Joe Biden’s first day in office.

At the same time, attention was focusing on altcoins, which showed conspicuous strength, epitomized by ether’s climb to fresh all-time highs. 

No sooner had Biden’s inauguration come and gone, however, did the mood turn sour, with unexpectedly intense selling pressure suddenly entering Bitcoin and carrying forward to altcoins. 

While $30,000 held on Thursday, the mood was nervous after a bizarre interpretation of analysis from BitMEX went viral. Penned by crypto news media outlet Cointelegraph, an article precising BitMEX’s discussion of a routine chain reorganization in bitcoin appeared to claim that, for the first time in its history, the cryptocurrency had seen a successful so-called “double spend” attack. 

Effectively a user spending the same coins twice, such an occurrence has remained impossible thanks to Bitcoin’s decentralized Proof-of-Work algorithm. While experts were quick to refute the article’s apparent claims, its publication did nothing to lift the market’s spirits, with bitcoin subsequently hitting lows of $28,950 overnight.

markets report bitcoin price
Bitcoin’s recent drop in context. (photo: TradingView)

Miners step up outflows

Friday thus began with network participants attempting to shake off the accusations that Bitcoin’s network integrity had been compromised, while new data showed that this week had also seen considerable withdrawal activity from miners. 

In particular, F2Pool, currently the bitcoin mining pool with the largest share of the market, made several daily withdrawals of 10,000 BTC. Their destination remains unknown, but in line with historical precedent, such large outflows coincided with downward price pressure. 

markets report bitcoin price
F2Pool’s outflows spiked over the past week. (Photo: CryptoQuant)

Thanks to a more recent market phenomenon, however, even these large sections of the supply available for purchase appear to have already changed hands. As Modern Consensus reported, asset manager Grayscale has upped its bitcoin buy-ins this month, with figures suggesting that the trend continued throughout this week. 

The 24 hours to Friday saw an extra 1,088 BTC ($34.6 million) added to the Grayscale Bitcoin Trust, which at press time had a total balance of 642,610 BTC ($20.4 billion).

“Jesus, you’re not playing around,” Morgan Creek Digital co-founder Anthony Pompliano responded to the company’s recent activities.

A “massive opportunity”

In terms of forthcoming short-term price action, the possibility of $25,000 remained, but there was no cause for concern, says popular trader Michaël van de Poppe.

“It’s just a very natural and organic way how markets behave: nothing goes up in a straight line; corrections do occur, corrections often do occur in a very painful and heavy way,” he said about the sub-$30,000 dip.

Van de Poppe added that he felt the market was “close” to forming a bottom, arguing that even now, bitcoin is a solid buy-in. 

“I think if you were patient enough to not buy at $40K and you get the opportunity to buy a significant amount at 30, anything from 30 down to 25—even lower—is a massive opportunity for the coming years,” he commented.

At press time, BTC/USD circled $32,250 after a swift uptick took the pair to near 24-hour highs. Altcoins were mixed, with Polkadot, Litecoin and Chainlink nonetheless managing to post daily gains of around 5%.

“Not worried about catching the bottom. Not going to rush into alts or buying more spot $BTC or $ETH yet,” fellow trader Josh Rager added on Twitter. 

“Happy to buy at a slightly higher price after confirmation of bounce or reversal. Nothing worse than buying something and watching it continue to go lower.”

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Anthony Bevan is a journalist focusing on disruptive finance and cryptocurrency, along with the changing face of the market as Bitcoin gains mainstream adoption. Journalists covering cryptocurrency for Modern Consensus May hold positions in some of the currencies they write about.