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What is going on with the Bitcoin price? Three reasons why the growth of BTC has stopped

Igor Grigorchenko

News editor

21.07.2022 at 05:58

In recent days, the cryptocurrency market experienced a wave of growth: Bitcoin rose to above $24k. However, today the uptrend was broken and the world’s main cryptocurrency has corrected slightly. Let’s discuss three negative news factors that could block the further growth of BTC.

Tesla mess

Tesla’s quarterly report caused the cryptocurrency market to stop growing, despite the rise of U.S. stock indices and especially the NASDAQ (whose dynamics are often repeated by Bitcoin). The electric car maker unexpectedly sold out 75% of its BTC worth $936 million.

Elon Musk tried to calm the community, appealing to the difficult financial situation of the company, the sale of Bitcoin was not a consequence of the refusal to support the cryptocurrency, the company just needed money for operating expenses.

As a reminder, Tesla became the second institutional investor in history after Microstrategy to officially invest some assets in BTC. The company spent $1.5 billion to buy them last year. The Q2 sale of 32,400 BTCs took place in June at a rate of about $29,000.

Given that the purchase price may have been $38,000, Tesla “dropped” Bitcoin at a loss, which contradicts the words Elon Musk expressed about further support for the cryptocurrency market. The Tesla owner has not yet announced specific plans to buy or sell the remaining BTC.

Attack on South Korea’s exchanges

The release of Tesla’s unfortunate report coincided with a massive investigation by South Korea’s prosecutor’s office. Yesterday, an investigation team conducted simultaneous searches and document seizures at five of the country’s largest exchanges. South Korea has traditionally been very prominent in the crypto-industry, and such a massive attack on a number of major exchanges did not remain unnoticed by the market.

The prosecutor’s office plans to study the LUNA and UST transactions, comparing them to cashing funds through the crypto exchanges. As part of the case, investigators are trying to accuse the Terra founder of scamming and creating a crypto pyramid.

Reminder: His project attracted more than $30 billion in investments by promising a 20% annual guaranteed return to investors on UST deposits. At the same time, the issuing of stablecoin was not backed by tangible assets, nor were the promised returns. The unbalanced tokenomics of the project led to its collapse, leading to cascading liquidations of other major projects that depended on Luna/UST.

Suppose prosecutors prove the involvement of local exchanges in the scam, due to the cashing of UST and LUNA, according to the same model. In that case, charges can be brought against other exchanges, which is likely to take international scope. The U.S. have already joined the investigation, and South Korean financial intelligence officials arrived in Washington yesterday for a publicly unannounced visit.

ECB rate hike

The next important event of the week will be the European Central Bank meeting. The ECB’s decision to hike the key rate could be a reason to fix Bitcoin.

Eurozone inflation, which came out the day before yesterday and was an all-time record for the eurozone, could lead to a rate hike of 0.5%. Since modern crypto trading, as we wrote earlier, is largely leveraged, an increase in key rates is extremely negative for the world’s main cryptocurrency.

Looking at it from a historical perspective, key rate hikes in major regions like the U.S. or the European Union have always had a negative impact on Bitcoin. Since the rate rise in the eurozone is almost a foregone conclusion, many traders start to take profits at the peak of Bitcoin’s value in advance.

 

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