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Hodlers and whales: Who owns the most Bitcoin in 2022?

While the Bitcoin blockchain is public, knowing who owns the most Bitcoin in 2022 isn’t as simple as it should be. Here’s what we know.

One of the main features of the Bitcoin blockchain is its transparency. Bitcoin lets anyone see every transaction that has ever been made on its network and check the balance of every address out there. Because of this transparency, we’re able to know who owns the most Bitcoin (BTC) in 2022.

It’s important to look at who owns the most BTC, as the cryptocurrency’s supply is limited to 21 million coins. In February, Kim Grauer, director of research at blockchain forensics firm Chainalysis, told Cointelegraph that an estimated 3.7 million BTC have been lost, effectively deflating the cryptocurrency’s circulating supply.

Experts estimate that as Bitcoin’s adoption rises, demand for it will skyrocket. As 3.7 million coins are estimated to be lost and a significant amount is being held on-chain by early investors, what may follow is a supply shock. Such a shock could only materialize if demand skyrockets in the future.

Those who own the most Bitcoin are set to greatly benefit from such a shock. Moreover, a significant supply being held by one entity is seen as a risk because if that entity ends up selling its war chest on the market, it could lead to a significant downside.

Who owns the most Bitcoin?

The entity that is widely acknowledged to hold the most Bitcoin is the cryptocurrency’s creator, Satoshi Nakamoto. Nakamoto is believed to have around 1.1 million BTC that they have never touched throughout the years, leading to several theories regarding their identity and situation.

A significant amount of analysis has been put into determining how many coins Nakamoto actually has. After bringing BTC into existence by mining the genesis block, Nakamoto mined a significant number of blocks through their hardware at the time, with each block coming with a 50-BTC reward.

Nakamoto always used different Bitcoin addresses and disappeared back in 2010. It’s unclear how many blocks they mined as other early adopters got in on the action rather early as well. Lower estimates point to Nakamoto having around 750,000 BTC.

While the exact holdings of Nakamoto aren’t completely clear, those of publicly traded companies, governments, funds and other transparent organizations are.

Public and private company holdings

Over time, several organizations have added Bitcoin to their balance sheets. The most notable is business intelligence firm MicroStrategy, which accumulated 129,218 BTC after first investing in the cryptocurrency in August 2020.

The company’s CEO, Michael Saylor, has doubled down on the company’s Bitcoin strategy throughout the bear market, saying MicroStrategy plans to hold BTC “through adversity.” In early 2021, possibly thanks to influence from Saylor, electric car maker Tesla also invested in Bitcoin, risking $1.5 billion to buy 43,200 BTC.

According to Bitcoin Treasuries, a website tracking the Bitcoin held by publicly traded firms, other companies that have Bitcoin on their balance sheet include Core Scientific, BTC Miner Marathon Digital Holdings, fintech giant Square, crypto exchange Coinbase and crypto investment firm Galaxy Digital.

Thomas Perfumo, head of business operations and strategy at Kraken, spoke to Cointelegraph regarding companies’ cryptocurrency holdings:

“All companies should have an open mind towards Bitcoin, but they should consider what represents the best interests of their shareholders. At Kraken, we hold cryptocurrencies as a treasury asset.”

Perfumo added that Kraken also offers employees the option to take “as much of their salary in crypto as they would like via a payroll solution we call Sidemoon.” He added that a “significant number” of Kraken’s employees take advantage of the solution.

Public companies are estimated to have a total of 268,271 BTC, equivalent to over 1.27% of Bitcoin’s total supply. Over the years, however, several private companies have also revealed they hold BTC.

The private companies with the largest amounts of BTC are the firm behind the EOSIO software Block.one, which holds 140,000 BTC, the Tezos Foundation, which holds 17,500 BTC, and Stone Ridge Holdings Group, with 10,000 BTC. MassMutual comes next, with 3,500 BTC.

In total, private companies reportedly have 202,068 BTC. Speaking to Cointelegraph, Bill Barhydt, CEO of crypto investment firm Abra, noted companies should invest in BTC but opt for the “right size” for their treasuries. Barhydt added:

“Companies with a long-term time horizon should consider putting even more of their liquid assets into Bitcoin and Ethereum.”

The CEO revealed Abra holds Bitcoin by likening it to companies known to have invested in the cryptocurrency, including Tesla. Per his words, as accounting rules in the United States are “fixed and modernized, it will become even easier to replicate” what companies like these are doing.

Countries that own the most Bitcoin

There are several countries holding Bitcoin as well. Most have gotten their hands on the flagship cryptocurrency by seizing it, but these holdings are often quickly sold in auctions to private investors.

El Salvador is the country holding the most Bitcoin, with 2,301 BTC in its treasury. The country adopted the cryptocurrency as legal tender in September 2021 and has invested in it numerous times. It’s planning on creating a Bitcoin City, using power from a volcano.

In April 2022, Finland was reported to be holding 1,981 BTC confiscated during criminal investigations with plans to auction off the funds later on in the year. At the time of writing, no report suggesting the funds have been auctioned emerged.

Ukrainian civil servants have provided data through Opendatabot showing they have owned a total of 46,351 BTC as of April 5, 2021. These declarations came as property disclosure requirements imposed on public officials, meaning they’re the holdings of individuals and not the government itself.

Similarly, Georgian parliament members are said to collectively hold 66 BTC, although the funds belong to private individuals and not the government.

Bitcoin fund holdings

Cryptocurrency investment funds allow investors to gain exposure to their underlying assets without dealing with them. In practice, this means gaining exposure to a cryptocurrency like Bitcoin without having to deal with public or private keys.

Funds add more Bitcoin in response to investor inflows and divest of their holdings as investors withdraw. The largest fund holding Bitcoin is Grayscale’s Bitcoin Trust, which has 643,572 BTC, equivalent to over 3% of the cryptocurrency’s circulating supply. Next is CoinShares, which holds around 42,980 BTC through XBT Provider’s exchange-traded products.

Ahead of this month’s crypto market sell-off, the Purpose Bitcoin ETF was the largest exchange-traded fund by BTC holdings. The sell-off saw the fund’s holdings drop from 47,818 BTC to 23,307 BTC between June 16 and 17, a staggering 51% drop. The fund’s holdings are still estimated to be above those of 3iQ’s CoinShares Bitcoin ETF, which has an estimated 12,115 BTC.

Largest individual Bitcoin holdings

Bitcoin addresses are pseudonymous, which means that while we easily see what addresses have the most Bitcoin in them, we can only identify who’s behind each one through extensive blockchain analysis or if the entity behind them comes forward.

Data from BitInfoCharts shows that the top Bitcoin wallets belong to cryptocurrency exchanges, which means they hold the assets of various users who choose custody of their funds on exchanges. Data shows there are five Bitcoin addresses with between 100,000 and 1 million BTC in them. Four of these have been identified and belong to exchanges.

Bitcoin holder composition. Source: BitInfoCharts

While it’s possible to see how many addresses hold how much BTC, this doesn’t exactly answer the question of what individuals have the largest Bitcoin holdings. Analyzing the market and individuals’ statements, however, provides us with various clues.

Changpeng Zhao, founder and CEO of leading cryptocurrency exchange Binance, was said to have a net worth of $96 billion in January 2022, with this estimate reportedly not including holdings of Bitcoin and BNB.

The CEO has said numerous times that he holds no fiat currencies, which would imply significant BTC and BNB holdings. While exact figures aren’t known, it’s rather safe to assume Zhao is among those holding a significant amount of Bitcoin.

Other well-known large Bitcoin holders are Tyler and Cameron Winklevoss, who invested the millions they earned from their lawsuit against Facebook into cryptocurrencies and became the first Bitcoin billionaires. The duo was rumored to at one point own 1% of all Bitcoin in circulation.

Silicon Valley-based venture capital investor Tim Draper is known to have purchased at least 30,000 BTC back in 2014, buying the coins from an auction held by U.S. authorities after seizing the funds from the now-defunct darknet marketplace Silk Road.

Other individuals believed to have large amounts of BTC include Digital Currency Group CEO Barry Silbert, FTX CEO Sam Bankman-Fried, Saylor, and Coinbase CEO Brian Armstrong. Their exact holdings — if they even hold Bitcoin — are unknown.

Bitcoin hodler growth and its supply

As the number of Bitcoin holders out there grows, the available supply of the cryptocurrency goes down, potentially leading to the aforementioned supply shock. Kraken’s Perfumo noted that the magic of crypto is that any individual has complete flexibility in managing their crypto custody.

Abra’s Barhydt said that investors in Bitcoin and Ether (ETH) should have a minimum time horizon of five to seven years or longer and should “assume that those funds are locked up for at least five years, given the volatility inherent in valuing exponentially growing technologies.”

Assuming funds are locked up would add to the potential supply shock. Kent Barton, tokenomics lead at ShapeShift DAO, told Cointelegraph that bear markets “have historically been an excellent time to purchase Bitcoin at relatively low prices,” even though there are no guarantees prices will ever rise again.

During bull markets, Barton said it’s important to “take a certain percentage of your risk off the table,” as moving some BTC to fiat when prices are high “means that you’ll be in a better position to weather the next bear market and have dry powder to buy Bitcoin at low prices.” Barton added:

“On a very long-term timeframe, Bitcoin continues to serve as a potential hedge against the dollar collapsing.”

Whether Bitcoin is a good investment or not depends on who you ask. The currency can neither be debased through inflation nor can its transactions be censored by a central authority. To some of its holders, prices are almost irrelevant as long as these and other qualities are maintained.

What is a bull trap, and how to identify it?

Newbie crypto traders should be wary of bull traps. If you suspect one is on the way, here are some tips to identify it.

How to identify a bull trap

Here’s how to spot a bull trap with some tell-tale indicators that one is on the way:

RSI divergence

A high RSI might be an indication of a potential bull or bear trap.

A relative strength index (RSI) calculation may be used to identify a possible bull or bear trap. The RSI is a technical indicator, which can help determine whether a stock or cryptocurrency asset is overbought, underbought or neither.

The RSI follows this formula:

Formula to calculate relative strength index (RSI)

The calculation generally covers 14-days, although it may also be applied to other timeframes. The period has no consequence in the calculation since it is removed in the formula.

In the instance of a probable bull trap, a high RSI and overbought circumstances suggest that selling pressure is increasing. Traders are eager to pocket their gains and will most probably close out the trade at any moment. As a result, the first breakout and uptrend may not be an indication of continuing price rises.

Lack of increase in volume

When the market is truly breaking out to the upside, there should be a noticeable increase in volume because more people are buying the security as it rallies higher.

If there is little or no increase in volume on the breakout, it’s a sign that there isn’t much interest in the security at that price and that the rally might not be sustainable.

A price rise without a significant increase may also probably be due to bots and retail traders jockeying for position.

Absence of momentum

When a stock experiences a sharp drop or gap-down with enormous red candles but then rebounds very gently, it’s an indication of a bull trap.

The natural tendency of the market is to move in cycles. When it reaches the top of a cycle, it is generally a period of consolidation as the bulls and bears battle it out for control.

This lack of momentum can be considered an early warning sign that the market is due for a reversal.

Lack of trend break

A decline in price is indicated by a sequence of lower lows and lower highs.

Trends in stock prices do not always change when advances are made. A downtrend is still intact as long as the price increase does not exceed the most recent lower high.

Lack of confirmation is one of the most frequent mistakes made by those caught in bull traps. They should already suspect that if the present high does not surpass the previous high, then it is in a downtrend or a range.

This is typically considered a “no man’s land,” one of the worst places to begin a purchase unless you have a good reason to do so.

Although some traders may be disappointed by this, most are better off waiting for confirmation and buying at a higher price than attempting to “get in early” and be trapped.

Re-testing of resistance level

The first indication of an approaching bull trap is a powerful bullish momentum maintained for a long time, but which reacts swiftly to a particular resistance zone.

When a stock has established itself as a strong uptrend with little bearish pressure, it implies that buyers are flooding in all of their resources.

However, when they reach a resistance level they’re unwilling or afraid to breach, the price will typically reverse before going even higher.

Suspiciously huge bullish candlestick

In the last stage of the trap, a huge bullish candle usually takes up most of the immediate candlesticks to the left.

This is generally a last-ditch effort by the bulls to take control of the market before the price reverses. It could also occur due to several other reasons:

  • Big players are intentionally pushing the price higher to entice unsuspicious buyers.
  • New investors are confident that a breakout has occurred, and begin purchasing again.
  • Sellers intentionally let the buyers dominate the market for a short period, allowing sell limit orders above the resistance zone to be accepted.

Formation of a range

The final feature of a bull trap arrangement is that it creates a range-like pattern on the resistance level.

The price of an asset is said to bounce back and forth amid a support and resistance level when it fluctuates within a range.

Because the market might still be creating smaller, higher highs, this range may not be perfect, especially on the upper end. Yet the start of the bull trap is visible, as the huge candle previously stated forms and closes outside of this range.

What causes a bull trap?

Many factors bring about a bull trap, and one of the most common is a lack of buying volume on the rally back up to the previous high.

Weak buying volume is an indication that there isn’t much interest in the security at a specific low price and that the bulls aren’t strong enough to push the price higher.

Another common cause of bull traps is a false breakout from a consolidation pattern. The price breaks out of a range to the upside, but then quickly falls back down and resumes its downtrend.

How does a bull trap work?

Bull traps can lead to severe consequences for those purchasing during a perceived reversal.

Let’s say you’re looking at a chart of an asset in a downtrend. After a while, the price reaches a point where it starts to consolidate sideways in what’s called a “range.”

During this time, the bulls and bears are locked in battle as they try to push the price in opposite directions. The bears are trying to push the price down to new lows while the bulls are fighting to keep the price up.

At some point, there is a breakdown from the range as the bears win, and the price falls to a new low. Just when it seems like the downtrend is about to resume, however, the bulls make a comeback and push the price back up to its previous high.

Many traders see this as a bullish reversal and start buying, thinking that the downtrend has ended. Unfortunately, this is usually just a temporary move, and the price soon resumes its downward trend, leading to heavy losses for those who bought at or near the top.

What does a bull trap mean in the crypto market?

Also referred to as “dead cat bounce,” bull traps are often seen in crypto due to speedy recoveries.

In crypto, bull traps work as they do in any other market. For instance, if the price of an altcoin has been rising steadily over the past few days, you may believe it will continue to rise. You buy some and wait for the price to go up so you can sell it at a profit.

However, the opposite happens, and you find yourself trapped in a losing position. You witness the downtrend and then wait for a bullish reversal when you can buy the dip, thinking you’re purchasing the asset at a good price. The trap reveals itself as such when the price retreats and goes back on the downtrend.

Role of psychology in bull traps

Bulls chase and ride the high of bull conditions, which can all be well and good until the next bear market returns.

When this happens, they can get caught in a bear trap where they may liquidate their position at a loss. Due to a unidirectional mentality (strictly bear or bull), investors accustomed to trading in a bull market might fall into the trap of buying high and selling low. Experts suggest having a bidirectional mentality to succeed in both bull and bear markets, as this allows for greater profits during long-term trends.

What are bull traps used for?

Bull traps are used by both day traders and long-term investors to take advantage of unsuspecting market participants.

For day traders, a bull trap can be an opportunity to short the security as it rallies back up to the previous high. The price will then resume its downtrend, leading to profits for the trader.

For long-term investors, a bull trap can be an opportunity to buy the security at a lower price as it falls back down after the rally. They are then able to hold the security for the next uptrend.

What is a bull trap in trading?

In trading, a bull trap is a situation where a trader buys an asset believing its price will continue to rise, only to see it fall sharply after reaching a new high.

Bull traps occur during periods of market uncertainty or when false information is circulating about a particular asset. It’s called a bull “trap” because traders who are none the wiser are made to believe that a declining asset is actually on the rise. This false sense of security can lead to heavy losses. 

When a bull trap is suspected, traders should exit the trade immediately or enter into a short position. Stop-loss orders can come in handy in these scenarios, especially if the market is moving swiftly, to avoid being swept away by emotions.

Related: Crypto trading basics: A beginner’s guide to cryptocurrency order types

 As with a lot of things in trading, identifying a bull trap can be difficult. However, the best way to avoid bull traps is to notice warning signs in advance—such as low volume breakouts. We’ll discuss this further below.

New spot Bitcoin ETF launches at Euronext Amsterdam Exchange

The Jacobi Bitcoin ETF will start trading on the Euronext Amsterdam Exchange under the ticker BCOIN in July.

Major Dutch stock exchange Euronext Amsterdam, a part of the pan-European marketplace Euronext, is debuting its first Bitcoin (BTC) exchange-traded fund (ETF).

Jacobi Asset Management, a London-based digital asset management platform, is preparing to launch its Jacobi Bitcoin ETF on Euronext Amsterdam next month, the firm announced on Thursday. The spot Bitcoin ETF will start trading on the Euronext Amsterdam Exchange under the ticker BCOIN.

The Jacobi Bitcoin ETF is positioned as the first spot Bitcoin ETF launched in Europe, Jacobi founder and CEO Jamie Khurshid told Cointelegraph.

“Our product is the first spot or physical-backed Bitcoin fund, and the fund is not allowed to lend, stake or leverage any of the assets it owns. For the first time in Europe, investors buying an exchange-traded Bitcoin product will own the units that own the Bitcoin,” Khurshid said. “There are other exchange-traded products in Europe but no other spot BTC ETF,” he added.

A spokesperson for Euronext confirmed that BCOIN will be the first spot Bitcoin ETF ever listed on Euronext. “This will be the first Bitcoin ETF on Euronext, or the first fund directly investing in Bitcoin. All other currently existing products on our segment are exchange-traded notes, or legally structured as debt instruments,” he said in a statement. While the ETF will arrive in July, Euronext did not provide a specific date for the launch.

As previously reported, Jacobi received approval from the Guernsey Financial Services Commission to launch the Bitcoin ETF in October 2021.

Custodial services for the Jacobi Bitcoin ETF will be provided by Fidelity’s crypto arm Fidelity Digital Assets while Flow Traders and DRW would serve as market makers to facilitate trading. Institutional and professional investors in Europe will be able to have access to the ETF for a 1.5% annual management fee, the announcement notes.

A former investment banker at Goldman Sachs, Khurshid believes that the new Bitcoin ETF launch will help bring more stability to the crypto market amid a massive sell-off. He said:

“We believe this will now remove the barrier to entry for those investment firms that have mandates to invest in regulated products only and will therefore increase adoption of digital assets bringing more stability and less influence from the whales, which is nothing short of a necessity for the crypto industry.”

Jacobi’s Bitcoin ETF launch in the Netherlands is a significant milestone in the global spot crypto ETF market as Amsterdam is associated with Europe’s top sharing trading venue, reportedly outstripping London in 2021.

As previously reported, Canada was one of the first countries in the world to debut a spot Bitcoin ETF with the launch of the Purpose Bitcoin ETF in February 2021. Australia debuted its first crypto ETFs in mid-May 2022.

Related: Why the world needs a spot Bitcoin ETF in the US: 21Shares CEO explains

While the global adoption of spot crypto ETFs has been growing in recent years, the United States is yet to approve a physical-backed Bitcoin ETF. On June 29, crypto investment giant Grayscale launched a legal challenge against the U.S. Securities and Exchange Commission after being denied its application to convert its Grayscale Bitcoin Trust into a spot-based Bitcoin ETF.

Bitcoin trading: Momentum strategies with different moving averages

The 20-Day moving average strategy provided good returns in 2018 and 2019, while the 50-Day MA strategy did better in 2021 and 2022.

One of the simplest strategies for trading cryptocurrencies involves the application of moving averages (MA). The basic premise is that if the price of an asset is above its moving average for a certain number of days, this is considered a buy signal. Once it falls below its moving average, the asset is sold, and a cash position is maintained until the price crosses the moving average again in the upper direction.

Cointelegraph Consulting’s latest bi-weekly newsletter issue looks at the many ways moving averages can be tweaked to catch Bitcoin price swings. Using Coin Metrics’ price data, this analysis is broken down into four parts. The first part uses trading strategies for different simple moving averages (SMA) — i.e., equal weighting of all past prices within the specified time window. The second part of this analysis looks at a specific form of moving average, the exponential moving average (EMA), where the weight of the more recent periods increases exponentially.

The third part looks at strategies that only trade once significant momentum signals appear, namely the golden cross and the death cross. Finally, rolling returns of different moving average strategies will be considered to evaluate which strategy was most successful.

Simple moving averages vs. exponential moving averages

For the sample period chosen in the charts below, the 50- and 100-day SMA strategies outperform their EMA counterparts. However, choosing a 20- or 200-day EMA strategy yields better results compared to the simple moving average strategies. It comes with the added benefit that maximum drawdowns are significantly lower.

In general, it is not clear which type and length of moving average will yield the best results. As EMAs put higher weight on more recent market moves, they are more likely to provide a trading signal earlier, albeit at the cost of some signals being wrong.

Comparison based on different entry points

Some of the strategies described above appear to be successful. However, beating the market is more difficult than following simple timing strategies. Especially in a bull market, many strategies yield results simply because the general trend is positive. In more difficult times, many strategies cannot shield from incurring losses.

If one invested based on these strategies in January 2022, all strategies would have beaten the market. The 200-day MA strategy would have signaled not to invest at all, which would have yielded the best outcome. All other strategies generated losses. The 50-day MA strategy illustrates how false signals can lead to value destruction that can at times exceed losses from a simple buy-and-hold strategy.

“Two crosses” strategy

In the field of technical analysis, traders often talk about the golden cross and the death cross. Both terms refer to the behavior of moving averages to each other. The most common version of the golden and death cross is related to the 50-day and 200-day MA. Once the 50-day MA moves above the 200-day MA, this golden cross signals an upcoming bull market, while the death cross — i.e., the 50-day MA moving below the 200-day MA — often marks the start of a bearish period.

The strategy that only considers a golden cross and death cross gets the general market trend right. It enters ahead of significant uptrends and exits once a serious downturn occurs. However, as this strategy reacts to larger market trends, it does take some time to exit the market and enter it again. This can shield from heavy losses but may also lead to some missed opportunities when the market changes direction.

Rolling analyses

The above results show that strategies based on moving averages are no panacea for bear markets or market fluctuations. Since the entry point matters for the performance of such strategies, one should look at different starting points.

The chart below shows what returns could have been made by applying a given strategy for one year — i.e. the return displayed for Jan. 1, 2017, is the result of a strategy that started on Jan. 1, 2016.

The same analysis can be done by executing each strategy for two years instead of one. While differences between strategies are at times wider compared to the analysis with one-year returns above, a similar picture emerges as the 20-day MA strategy yielded promising returns in 2018 and 2019, while the 50-day MA strategy performed better in 2021 and 2022. Yet in both analyses, a simple buy-and-hold strategy can outperform for some periods of time.

Rolling returns of executing a strategy for three years are qualitatively not too different from the two-year rolling analysis but come with higher returns in market run-ups, except for the one in 2021. However, when comparing all three time windows, it becomes clear that the ordering of strategy success can change over time. While the 20-day MA strategy has been dominant for some years (depending on the time frame of the rolling analysis), it has significantly underperformed in other years. The same can be said about the other strategies. Therefore, past returns are not a reliable predictor of the future success of a particular strategy. 

Averaging out

Momentum strategies based on moving averages can provide some guidance for traders and may at times provide relevant information about the general market trends. Nonetheless, they should be treated with caution as length, type of moving average, and starting point of an analysis can yield different results. Investors should carefully evaluate the data used and make sure that they are able to react to any signal in a timely manner.

Cointelegraph’s Market Insights Newsletter shares our knowledge on the fundamentals that move the digital asset market. The newsletter dives into the latest data on social media sentiment, on-chain metrics and derivatives.

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Disclaimer: The opinions expressed in the post are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product.

Crypto users take to Twitter to lament the ongoing market downturn

What goes up must come down. And then go up again. Then come down again. And on and on and on…

Crypto traders and investors started out the week with a major shock to the markets. As assets across the blockchain industry went into a collective dive on Monday, users took to Twitter to voice their dismay (or in some cases jubilation) with the current state of crypto.

Inflation, potential interest rate hikes, a looming recession, and yet another DeFi fiasco have all contributed to the current onslaught seen in markets on Monday. As a result, Bitcoin’s (BTC) price plunged to levels not seen since late 2020, several crypto exchanges limited users from withdrawing their tokens, an increasing number of Web3-centric companies announced layoffs, and the floor prices of various nonfungible token (NFT) projects tumbled.

Taking a look at a few tweets from seasoned crypto enthusiasts shows the overall sentiment. Holding Bitcoin and alts is the true crypto investors’ theme, however, some appear to be experiencing a weakening of their supposed diamond hands. As one user noted:

The crypto space isn’t alone in its plight, with the entire stock market experiencing a major loss in tandem. Increased monetary tightening from the Federal Reserve has caused investors to sell off many types of stocks as the S&P 500 fell 4% to reach a new low for 2022.

Whales and former whales have begun to make their voices heard as the realization that they’ve lost a massive chunk of their wealth becomes evermore apparent.

Elsewhere on Twitter, some are trying to figure out their next best move for buying, selling, hodling, and trading in the larger crypto markets.

While technical analysis and projections are forever the keys to some traders, the current market dynamics have rendered traditional charting techniques virtually obsolete. Here is a chart one such crypto enthusiast offered up to explain the loss of confidence in technical indicators:


Can the Optimism blockchain win the battle of the rollups?

Optimism has garnered interest from the most influential figures in the crypto Industry, like Vitalik Buterin.

Ethereum is plagued with criticisms of its less than optimal scaling capabilities and high gas prices. There have been talks about increasing the scaling capacity of the Ethereum mainnet for a while now. 

However, the Ethereum ecosystem needs a solution for scaling right now, and if Ethereum is not able to give these new applications a platform with enough scaling capabilities, they can seek alternatives like the BNB Chain or Cardano. Optimism rollout was created to solve exactly the scalability problem of Ethereum.

Optimism Rollup network is one of the several solutions trying to address Ethereum’s congestion problem. The Ethereum network is often congested to the almost maximum capacity, and until upgrades to the main blockchain are made, scaling solutions like Optimism allow Ethereum’s transactional abilities to remain usable without shelling out a fortune on gas fees.

In short, Optimism uses advanced data compression techniques to speed up and cut the costs of Ethereum transactions. They do so by a technique known as called Optimistic Rollups, where multiple transactions are “rolled up” into one transaction and settled on another cheaper blockchain. The verified transactions are then fed back to the main Ethereum blockchain. The biggest advantage of Optimistic Rollups is the fact that they do not compute by default, which theoretically leads to scalability gains. Estimates say Optimistic Rollups can offer 10-100x improvements to scalability. On the downside, however, is the existence of a “challenge period,” which is a time window in which anyone can challenge assertion and increase withdrawal time.

Battle of the rollups

Now, a natural question arises: How is this different from widely used zero-knowledge (zk) Rollups? 

Zk-Rollups rely on a zero-knowledge proof for all state transitions to function correctly. Afterward, each transaction is compared to the smart contract on the mainchain. Meanwhile, Optimistic Rollups depend on a user submitting a new state root to the sidechain without validating the rollup contract.

When it comes to application, perhaps the biggest difference between the two lies in costs, as Optimistic Rollups require nodes to simply execute contracts, whereas zk-Rollups need to produce a complex cryptographic proof that requires hundreds or thousands of expensive elliptic curve operations in a proof. This makes zk-Rollups significantly more expensive to use than Optimistic Rollups. However, zk systems have an advantage in bridging to layer 1.

In the world of Optimistic Rollups, there are two main players: Optimism and Arbitrum. The main difference between the two lies in the way they generate a fraud proof for the network. While the current version of Optimism requires non-interactive fraud proof, Arbitum uses an interactive method. Other differences are regarding their Ethereum Virtual Machine (EVM) compatibility and Ethereum tooling.

Currently, there are over 1,000 projects that use Optimism and the total value locked on this chain, according to DefiLlama, is $364.7 million at the time of writing. One of their biggest proponents seems to be Synthetix, which has over $120 million locked on Optimism. When asked about their trust in Optimism, a spokesperson from the Synthetix team told Cointelegraph:

“Synthetix was an early adopter of Optimism and decided on a protocol back in 2020 to build on this Ethereum scaling solution. At that time, it was a matter of choosing a solution with conviction. We identified early that we absolutely had to have scaling, as we are a very complex smart contracts suite. Perpetual futures and low latency oracles were not going to happen on L1.”

When Cointelegraph asked why Sythethix chose Optimism over Arbitium, considering Arbitium was market-ready prior to Optimism, they replied:

“Both Arbitrum and Optimism had a lot of work to do, but we made the decision to commit to working with a specific team, which was Optimism, and bear a lot of the costs that it would take to get to mainnet. We chose Optimism because they have some of the best researchers in the Ethereum community and we had a lot of confidence that they would be able to execute on their vision.”

In many ways, Synthetix has taken a similar approach to that they did with Chainlink in their pre-mainnet process. Synthetix has invested heavily in transitioning the protocol from a user-facing protocol, enabling direct trades and swaps to a base layer on Optimism for other protocols to build on top of. Since launching on Optimism, the team at Synthetix has seen several other protocols integrate with Synthetix to establish the foundation of the Synthetix ecosystem, which facilitates unique and efficient trading across several financial derivatives. 

Recent: Bitcoin and banking’s differing energy narratives are a matter of perspective

However, many in the industry share the same opinion. Jagdeep Sindhu, the lead developer and president of Syscoin, told Cointelegraph that the traction Optimism has gained is short-lived and, in the long run, Arbitium might have the edge over it. He elaborated:

“Optimism is front-line to EIP-4844 (blob tx data) as well as Cannon, which is inside of the new bedrock release. This means it removes the OVM interpreter and relies directly on EVM execution for fraud proofs. Nitro of Arbitrum does the same thing. However, Arbitrum is a bit more tight-lipped on scheduling the release. We feel Arbitrum is closer to release, but it works under more of a closed source methodology, making it hard to know until all of the tooling is released.”

Jagdeep thinks it’s only a matter of time until the release of Nitro and the pendulum will go back in Arbitium’s favor. He continued:

“We put Nitro at about a 1–2 month schedule to release and Cannon at about a 3–6 month schedule to release, given the current state of the codebases. We do not feel Optimism is gaining on Arbitrum long-term because once Nitro is released there will be considering adoption for it as well.”

The increasing traction of Optimism 

Optimism has gained institutional support from the likes of Andreessen Horowitz (a16z) and Paradigm. In March 2022, they raised a total of $150 million in a Series B funding round at a valuation of $1.65 billion. 

In the press release announcing the Series A funding for Optimism, a16z said:

“One of the most exciting things about what Optimism has built is that it can be seen in many ways as an extension of Ethereum — from its philosophy down to its tech stack. This close adherence to Ethereum development paradigms results in a very easy transition for developers, wallets, and users: no new programming languages, minimal code changes to existing contracts required and out-of-the-box support for the majority of existing Ethereum tooling.”

The aspect of aligning the core philosophies of both Optimism and Ethereum was recently praised by Ethereum co-founder Vitalik Buterin too:

Token House, which is already active, governs technical decisions related to Optimism, such as software upgrades. Citizens’ House is scheduled to be active later in 2022 and will govern public-goods funding decisions. 

Talking about the governance of Optimism, founder of Wealth Mastery, Lark Davis — popularly known as TheCryptoLark — told Cointelegraph:

“Governance is most often a whale game. And, governance participation rates are often very very low. So, using a non-token model actually makes sense. That way smaller more active community members actually matter, and big lazy whales matter less.”

Optimism’s roadmap comprises updates to the Optimism protocol, like a next-generation fault proof, sharded rollups and a decentralized sequencer. The decentralized sequencer, which is the technology responsible for creating blocks on Optimism, provides an avenue to move most transactions off-chain.

Optimism token and airdrop

Optimism launched its native token OP on May 31, 2022, where a total of 231,000 addresses were eligible to claim 214 million OP tokens as part of their first airdrop. This was one of the most prominent events in Optimism’s history as far as tokenomics is concerned, as the 214 million OP tokens accounted for 5% of the total 4.29 billion supply. However, 95% of the tokens are yet to hit the market. 

Recent: DeFi pulls the curtain on financial magic, says EU Blockchain Observatory expert

OP tokens were distributed according to the following:

  • 19% of the initial OP token supply is reserved for user airdrops.
  • 25% of the initial OP token supply is allocated for proactive project funding.
  • 20% of the initial OP token supply plus inflation is allocated for retroactive public goods funding.
  • 19% of the initial OP token supply is allocated to core contributors.
  • 17% of the initial OP token supply is allocated to OP investors.

Optimism-based projects have spiked the interest of both developers and people with a monetary interest in the token. However, despite institutional interest from prestigious firms like a16z and industry leaders like Buterin, the price of the OP token has fallen from $4.50 to just over $1.00. A lot of it could be attributed to the market conditions at large and the current limited use of OP tokens. However, when the market turns bullish and the Ethereum network gets more congested, it is certain that interest in Optimism is bound to pick up. 

How to survive in a bear market? Tips for beginners

Bear markets represent the most dreaded period in any investment cycle, but there are a few ways to stay ahead and weather the storm.

Usually, bear markets bring about a feeling of uncertainty in any investor. Even more so for a newcomer, for whom it can feel like the end of the world. It may even be common knowledge that during bull cycles, investors are sure of making gains. Whereas in bear markets such as this, an unimaginable amount of pessimism sets in.

The co-founder and strategic lead at the Kylin Network, Dylan Dewdney, told Cointelegraph that the two major mistakes that investors make while feeling anxious are “One, over-investing and two, not investing with conviction.”

“You need to find the sweetspot where you have enough conviction in your investments while managing the resources devoted to them such that you are 100% comfortable with being patient for a long time. Lastly, bear markets are where the magic really happens — buying Ether at $90 in December 2019, for example,” Dewdney said.

According to data from blockchain analysis firm Glassnode, traders made almost 43,000 transactions buying and selling requests on crypto exchanges in early May. This accounted for a whopping $3.1 billion worth of Bitcoin. But, the panic that caused those requests came from the crash of Terra, which saw the market dip even further.

Bear markets occur when there is a general dip in the prices of assets, of at least 20%, from their most recent highs. For example, the current bear market has Bitcoin (BTC) down by more than 55% from its November record high of $68,000. Bitcoin is now trading below the $25,000 mark at the time of writing.

Bear markets: Genesis, severity and how long they last

Bear markets are often tied to the global economy, according to Nerdwallet. That is, they occur either before or after the economy goes into recession. Where there is a bear market, there’s either an ongoing economic meltdown or an upcoming one.

Essentially, a sustained price dip from recent highs is not the only indicator of an ongoing bear market. There are other economic indicators that investors must still factor in. This is to enable them to learn whether a bear market is playing out or not. Some of the indicators include interest rates, inflation and rate of employment or unemployment, among others.

However, the relationship between the economy and a bear market is even simpler than that. When investors notice that an economy is shrinking, there are widespread expectations that corporate profits will soon start to reduce as well. And, this pessimism brings them to sell off their assets, thus, pushing the market even lower. As Scott Nations, author of The Anxious Investor: Mastering the Mental Game of Investing, says, investors often overreact to bad news.

In any case, bear markets are shorter than bull markets. According to a recent CNBC report, bear markets last about 289 days. Bull markets, however, can go even above 991 days. Additionally, an Invesco data analysis report puts the losses attached to bear markets on an average of 33%. So, down cycles are usually not as effective as the average gain of 159% of a bull market.

Recent: DeFi pulls the curtain on financial magic, says EU Blockchain Observatory expert

Although no one knows for sure how exactly long a bear market might last, there are a few tips on how to weather it.

Navigating a bear market

As an investor, there is probably nothing anyone can do to prevent an unfavorable market condition or the economy at large. Nonetheless, there are lots of potentially great moves that one can make to protect their investments.

Dollar-cost averaging

Dollar-cost averaging (DCA) describes an investment strategy in which an investor buys a fixed dollar amount of a certain asset on a regular basis, regardless of that asset’s price in dollars. The strategy is based on the belief that over time, prices will generally pick up the pace and eventually trend upward during a bull run.

The head of research at CoinShares, James Butterfill, told Cointelegraph that Bitcoin now has a well-established inverse correlation to the United States dollar:

The symbolic bear and the bull in front of the Frankfurt Stock Exchange. Source: Eva K.

“This makes sense due to its emerging store of value characteristics, but it also makes it incredibly sensitive to interest rates. What has pushed Bitcoin into a ‘crypto winter’ over the last six months can by and large be explained as a direct result of increasingly hawkish rhetoric from the Fed. The Federal Open Markets Committee (FOMC) statements are a good indicator of this, and we can observe a clear connection to statement release times and price moves.”

When this prudent investment approach is mastered, the investor’s buy price is averaged over time. That is, one can enjoy the benefits of buying the dip and also avoid investing all their life savings during market highs. After all, as dreaded as bear markets are in the investment world, they are also the best times to buy crypto assets at the lowest prices.

Diversify your portfolio

For investors who have a diverse range of assets in their portfolio, the impact of bear markets may not be as severe. When bear markets are fully in progress, the prices of assets generally plunge but not necessarily by the same amounts. So, this valuable strategy ensures that an investor has a mix of winners and losers in their assets during a bear run. Thus, total losses from the portfolio will be reduced to the barest minimum.

Consider defensive assets

During prolonged bear markets, some companies (mostly smaller or younger) tire out along the way. Whereas other more-established firms with stronger balance sheets can withstand the harsh conditions for as long as necessary.

Therefore, anyone looking to invest in company stocks should go for stocks of those companies that have been in business for a long time. Those are defensive stocks. And, they are usually more stable and reliable in a bear market.

Bonds

Bonds can also offer an investor some relief during bear cycles. This is because the prices of bonds usually move opposite to stock prices. So, bonds are a key part of any near-perfect portfolio, giving an investor relative ease to the pain of a bear market.

Index funds or exchange-traded funds

Some sectors are known to thrive reasonably well during market downturns, including the utilities and consumer goods sectors. And more than any other sector, they can perform to earn them the name “stabilizing assets.” Investing in the sectors mentioned above through index funds or exchange-traded funds (ETFs) can be a smart move. This is because each index fund or ETF holds shares across various companies.

Play blind

There is no doubt whatsoever that a bear market will tempt investors to run and never look back. Their will and endurance will also be tested. But, as history has shown, bear markets don’t last forever and neither will the current one.

According to Hartford Funds, more than 26 bear markets have occurred between 1928 and now. And, each one of those bear markets was immediately followed by a bull market, bringing more than enough profits to make up for whatever losses might have been incurred.

So, it is important to always take your mind off the prevailing downturn, especially if you’re investing for the long term, like for retirement. Eventually, the bull markets you’ll witness along the way will outdo the bear markets.

The ultimate decision

As earlier explained, there are massive risks that come along with bear markets. But, they also offer a good basis for success in the next bull run. That is, however, dependent on good strategic investment planning mixed with patience. So, profits can be assured when the market finally turns around, whether you’re always DCA-ing, diversifying into other assets, investing in ETFs and index funds, or stocks.

Losing money is always a hard pill to swallow, but the best way to get through market dips is not by running. Instead, take note of the wide array of recovery options and keep calm.

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“While Bitcoin’s price performance has been weak in the face of an aggressive Fed, this current hiatus in price-performance may very well be short-lived. We believe a policy mistake by the Fed is highly likely where Bitcoin prices are likely to diverge from growth equities. Meanwhile, the former is likely to benefit from a dovish Fed and weaker USD while the latter underperforming in the face of a recession or stagflation,” says Butterfill. He added:

“Sadly, we believe that the U.S. and the rest of the world are likely to slip into economic decline in 2023, although there are many unknowns. Perhaps it will be stagflation that then progresses into recession? As the liquidity trap really takes a grip on central bankers, we believe Bitcoin is a good insurance policy in the face of this monetary policy mess.”

In this together: Musk and Saylor down a combined $1.5B on Bitcoin buys

Tesla and Microstrategy have a combined impairment loss of almost $1.5 billion —will they HODL on?

As the bear market bites, holding crypto investments can be a tough pill to swallow. Consider two of the largest bag holders of publicly traded companies. They are down by almost $2 billion dollars on their Bitcoin (BTC) buys. 

According to Bitcointreasuries.net, the 130,000 and 43,00 Bitcoin held by Microstrategy and Tesla, respectively, are worth considerable sums less.

The top “Hodlers” of Bitcoin according to Bitcointreasuries.net

For Microstrategy, Michael Saylor splashed out almost $4 billion ($3,965,863,658) on 129,218 BTC, approximately 0.615% of the 21 million total supply. The Bitcoin price nosedive has ripped away earlier gains: The investment is worth $3.1 billion ($3,074,987,824), a loss of $900 million. Plus, in premarket trading on Monday, Microstrategy stock (MSTR) plunged to its lowest levels in months.

For Elon Musk, whose Tesla automotive company bought over 40,000 Bitcoin during the 2021 bull market, his $1 billion profit has gone south. The cost basis of $1.5 billion for 43,200 BTC, or 0.206% of the total Bitcoin supply, is now worth $1 billion ($1,017,789,280), down almost $500 million.

The total impairment loss (the loss in value) shared between the billionaire Bitcoin believers is roughly $1.4 billion. Given that both companies are publicly traded, the July quarterly results will dissect precisely how much each company is down on its Bitcoin assets.

At one point during November last year, Bitcoin surpassed Tesla’s market capitalization. Currently, Tesla’s market cap is roughly $721 billion while Bitcoin languishes at less than half a trillion dollars. Equally, the total market cap for crypto is plummeting, falling below one trillion dollars.

For Microstrategy, the situation is darker still. Saylor will have to top up a loan if and when the price of Bitcoin hits $21,000.

Saylor had previously patched things up with investors, sharing that the $205,000,000 loan it had taken out requires $410,000,000 collateral. Nonetheless, moneybags Microstrategy has more than 115,000 BTC it could pledge if the price continues to flatline.

Related: Crypto winter survival guide: Community shares game plan for the bear market

Ultimately, if the fallout from Celsius’ reported “insolvency” spreads, there could be more pain on the horizon. For some Bitcoin believers, such as Bitcoin’s first restaurant chain Tahini’s, “nothing has changed.” They will continue to accumulate, albeit at much lower prices.

Bear market: Some crypto firms cut jobs while others aim for sustainable growth

While crypto companies have been faced with major layoffs, things are nowhere as bad as the tech industry or other traditional sectors.

To put things into perspective, since November 2021, the total market capitalization of the digital asset industry has plummeted from it’s all-time high of $3 trillion to its current levels of approx. $1.27 trillion, thus showcasing a loss ratio of over 55%.

While this massive monetary downturn can be attributed to a range of factors, including the ongoing Russia-Ukraine war, rising inflation figures and worsening macroeconomic conditions have had a major impact on the crypto job landscape.

For example, earlier this month, Gemini, a cryptocurrency exchange helmed by the Winklevoss twins, announced that the bear market had forced them to lay off nearly 10% of its employees. The brothers noted that as part of their first major headcount cut, Gemini had to shift its focus on products that are “critical” to the firm’s long-term vision and goals. In fact, the brothers conceded that the existing turbulence was likely to persist for a few months at the very least, adding:

There is no denying the fact that the crypto industry has grown from strength to strength over the last couple of years. However, the last six odd months have been anything but pleasant for the market. 

“This is where we are now, in the contraction phase that is settling into a period of stasis — what our industry refers to as ‘crypto winter.’ […] This has all been further compounded by the current macroeconomic and geopolitical turmoil. We are not alone.”

How bad is the situation really?

In addition to Gemini, a number of other big-name firms have had to make serious cutbacks in recent months. For example, the second-largest cryptocurrency exchange in Latin America, Bitso, announced late last month that it was letting go of 80 of its employees due to worsening global economic conditions. At the time of the announcement, Bitso had over 700 full-time workers. 

The firm’s staff overhaul is not only a means of tightening its purse strings but also as a way of restructuring Bitso’s day-to-day activities. That said, a representative for the exchange recently revealed that they still have few vacancies across niche strategic domains such as accounting, tax, fraud detection and others.

Buenbit, one of Argentina’s leading cryptocurrency investment platforms, had to take more drastic measures to put a stop to its financial bleeding. During the last week of May, the company laid off approximately 45% of its workforce, shrinking its active employee pool from about 180 to just 100 workers.

Recent: MimbleWimble adds new features for Litecoin, but some exchanges balk

2TM, the parent company behind Mercado Bitcoin, also revealed that it was going to be laying off 12% of its 750-strong team as a result of “changes in the global financial landscape.” At press time, Mercado Bitcoin is by far the biggest crypto exchange in Latin America in terms of the total trading volume. As part of a statement regarding the move, a spokesperson for 2TM noted:

“The scenario requires adjustments that go beyond the reduction of operating expenses, making it necessary also to lay off part of our employees.”

Coinbase announced recently that it would slow down its rate of hiring and reassess its financial strategies so as to ensure the company’s continued success. The firm even rescinded a lot of job offers that it had already issued, putting the visas of many international candidates in jeopardy. Not addressing the visa issue directly, Coinbase’s chief people officer L.J. Brock wrote in a blog recently:

“As these discussions have evolved, it’s become evident that we need to take more stringent measures to slow our headcount growth. Adapting quickly and acting now will help us to successfully navigate this macro environment and emerge even stronger, enabling further healthy growth and innovation.”

Crypto-friendly trading platform Robinhood fired 9% of its workforce in April, a decision that came at a time when the company’s stock offering had touched an all-time low. Lastly, one of the Middle East’s most prominent crypto trading ecosystems, Rain Financial, laid off over 12 employees earlier this month, citing the global financial downturn as a reason for the same. 

A repeat of 2018

The aforementioned job turmoil seems to have an eerie feel to it, one that mirrors the events of 2018 when the market was faced with widespread layoffs across the board. At the time, crypto mining giant Bitmain got rid of a massive chunk of its employee base, with reports then suggesting that the company let go 1,700 of its 3,200 employees — including its entire Bitcoin Cash (BCH) development team, several engineers, media managers and more.

Migrant Mother, photograph by Dorothea Lange, 1936. The photograph was emblematic of employment struggles during the Great Depression. 

Prominent cryptocurrency exchange Huobi also carried out massive layoffs in 2018, with the company letting go of its “underachieving employees” while stressing that the remedial measures were necessary for “its core business” to sustain itself. At the time, the company reportedly had a workforce of over a thousand employees.

Lastly, blockchain software technology firm ConsenSys was also forced to make significant cuts in 2018, with the company’s CEO Joseph Lubin penning a letter to his employees revealing that he would have to let go of some 600 employees in an effort to help the business stay afloat.

Not all is lost

Amid these unfavorable market conditions, there are still firms that have decided not to lay off their employees. For example, crypto exchange platform FTX announced that not only will it be retaining its existing employees but will also be hiring new personnel as the crypto winter marches on.

As part of a recent Twitter exchange, CEO Sam Bankman-Fried explained that his firm will continue to expand its operations because its growth blueprint has been well structured, unlike some other firms that experienced unfounded, unsustainable “hyper-growth” during last year’s bull run.

Criticizing “hyper-growth companies,” Bankman-Fried said that hiring more staff quickly doesn’t necessarily lead to a substantial increase in productivity since rapid expansion, more often than not, makes it more difficult for everyone to stay on the same page. “Sometimes, the more you hire, the less you get done,” he said.

Even though FTX had slowed down its hiring earlier on in the year, the move, he noted, was not due to a lack of funds but rather a means of ensuring that new team members had enough time to adjust to their new roles and professional surroundings.

Some crypto recruiters noted that while the digital asset industry has indeed witnessed layoffs, its rate of hiring has remained spectacularly high, especially when compared to the traditional tech space. To this point, a number of Silicon Valley giants including Twitter, Uber and Amazon have announced major job cuts recently.

Netflix also terminated the roles of 150 employees after posting historically poor growth figures, while Facebook’s parent company Meta noted that it was instating a hiring freeze for any mid-to-senior-level positions after failing to meet revenue targets.

Recent: Self-regulatory orgs for crypto keep ecosystem afloat pending clear regulations

Neil Dundon, founder of employment agency Crypto Recruit, said that things have not slowed down when it comes to hiring within the digital asset industry. “We have a team based globally across the U.S., Asia/Pacific and European regions and demand is equally as high across the region,” he pointed out in a recent interview with Cointelegraph.

Similarly, Kevin Gibson, founder of Proof of Search, told Cointelegraph that the lay-offs taking place across the tech sector have had little to no impact on his crypto industry clients so far, adding:

“I’ve only heard of two companies letting people go. This may change in the next month, but any slack will immediately be taken up by well-funded quality projects. As a candidate, you won’t notice any difference. if you do lose your job, you will also have multiple offers pretty quickly.”

Therefore, as the ongoing downturn continues to affect the global economy in a big way, it will be interesting to see how companies operating within this space are able to stave off bearish pressure and survive the ongoing financial onslaught.

Solana price just one breakdown away from a 40% slide in June — here’s why

Network outages and decreasing smart contract reserves add further downside pressure to SOL price.

Solana (SOL) is nearing a decisive breakdown moment as it inches towards the apex of its prevailing “descending triangle” pattern.

SOL’s 40% price decline setup

Notably, SOL’s price has been consolidating inside a range defined by a falling trendline resistance and horizontal trendline support, which appears like a descending triangle—a trend continuation pattern.

Therefore, since SOL has been trending lower, down about 85% from its November 2021 peak of $267, its likelihood of breaking below the triangle range is higher.

As a rule of technical analysis, a breakdown move followed by the formation of a descending triangle could last until the price has fallen by as much as the triangle’s maximum height. This puts SOL’s bearish price target at $22.50 in June, down about 40% from June 10’s price.

SOL/USD daily price chart featuring “descending triangle” breakdown setup. Source: TradingView

But not all descending triangles lead to breakdowns, suggests a study conducted by Samurai Trading Academy. Notably, the likelihood of a descending triangle setup reaching its profit target is seven out of 10, based on the pattern’s history.

So that leaves SOL with a roughly 30% chance of avoiding a breakdown and rebounding.

Solana’s rebound scenario

Descending triangles that form during downtrends but still lead to price reversals typically mark the bottom of the asset’s bearish cycle.

Suppose SOL holds strong above the triangle’s horizontal trendline support. Then, the SOL/USD pair could break above the structure’s falling trendline resistance, and rise by as much as its maximum height, which puts its upside target around $65, up about 72% from June 10’s price.

SOL/USD daily price chart featuring descending triangle reversal setup. Source: TradingView

The descending triangle’s bullish profit target also coincides with SOL’s 50-day exponential moving average (50-day EMA; the red wave) near $59.

Meanwhile, SOL’s daily relative strength index (RSI), which has been reversing from its oversold threshold of 30 since May 12, also boosts the token’s upside prospects.

Solana TVL drops 75% from peak

Meanwhile, Solana’s fundamentals are mixed.

As a blockchain network, it had performed poorly in recent months due to back-to-back outages. The total value locked (TVL) inside Solana’s smart contracts has crashed to $3.69 billion, down 75% from its December 2021’s record high of $14.83 billion, data from Defi Llama shows.

Solana TVL performance history. Source: Defi Llama

On the bright side, Solana experienced sustained growth in network usage, developer activity, network infrastructure and overall ecosystem in the first quarter of 2022, according to a study penned by James Trautman, a researcher at U.S.-based crypto analytics firm Messari.

An excerpt reads:

“Several factors contributed to the Q1 results, including the continued growth of new NFTs and NFT markets, diversification of TVL, improvements in UX and new applications across several sectors outside of DeFi.

Related: Is Solana a ‘buy’ with SOL price at 10-month lows and down 85% from its peak?

On June 8, Solana’s venture capital arm launched a $100 million investment and grant fund to support its blockchain-based products in South Korea, a country whose crypto sector stands damaged by the recent collapse of Terra (originally LUNA, now, a $40 billion “algorithmic stablecoin” project. 

The decision expects to attract developers that want to migrate their projects from Terra to Solana, which could lead to a higher demand for SOL.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.