Bitcoin | Fundamental Analysis + Next Targets | MUST READ |

Bitcoin continued its prolonged decline last month. According to S&P Global Market Intelligence, the largest cryptocurrency fell 36.7%, dragging down many related stocks. For example, a software company and bitcoin investor MicroStrategy lost 37.9%, while investment fund Grayscale Bitcoin Trust fell 41.3%, and bitcoin miner Riot Blockchain fell 41.7%.

The crypto market has faced the same risk-averse investor behavior as in recent months, fueled by gloomy inflation reports and economic uncertainty at the global level. Moreover, lawmakers took some steps toward regulating cryptocurrencies in June, but the bureaucratic wheels are turning slowly, and no one knows what the long-term legal framework will look like.

If bitcoin prices continue to fall further, we will probably see some consolidation in the cryptocurrency industry. Companies with weak balance sheets and shaky business plans may be forced to shut down, file for bankruptcy, and sell their assets to stronger competitors. For example, cryptocurrency-focused hedge fund Three Arrows Capital filed for bankruptcy and liquidation, and cryptocurrency lending specialist Celsius Network froze transactions, withdrawals, and balance sheet transfers because of "extreme market conditions."

However, the crypto stocks mentioned earlier are not facing bankruptcy anytime soon.

Riot Blockchain is selling some of its bitcoins to pay its bills, but in June it produced more tokens than it sold. The company is also actively investing in its bitcoin mining infrastructure, adding new miners and improving the performance of older equipment through the use of immersion cooling systems.

Grayscale is struggling to convert its bitcoin trust fund into an exchange-traded fund (ETF) tied directly to the latest bitcoin spot prices. Investors have been reluctant to use the fund, which only settles trades at the end of each trading day. Thanks to the ETF's intraday share pricing, investors can react much more quickly to changes in this volatile market, so the bitcoin trust fund comes with a risk-based discount. In its current form, Grayscale Bitcoin Trust has 0.000922 bitcoin per share, which is $18 at current cryptocurrency prices. The share price is 32% lower at $12.25. The fund managers have now filed a lawsuit with the U.S. Securities and Exchange Commission (SEC) to overturn the agency's recent decision to refuse to convert the fund into an ETF.

MicroStrategy continues to buy bitcoin, arguing that digital currency is a great investment at such low prices. In the past two months, the company has increased its bitcoin holdings by 0.4 percent and now owns about 129,700 tokens. The business intelligence company has also taken out several loans secured against bitcoins, raising concerns about the financial impact of falling bitcoin prices. But CEO Michael Saylor says there will be no margin requirements on the loans until the bitcoin price falls below $3,562 per token, and even then, MicroStrategy can add other types of collateral. With the bitcoin price currently hovering around the $20,000 mark, MicroStrategy appears to be on solid financial footing.

Bitcoin prices are down 59% in 2022, and all three cryptocurrency stocks mentioned above are further down in value. Investors in this sector are nervous, and perhaps not without reason. The cryptocurrency market is full of uncertainty, and many investors have no clear idea of what blockchains can do or how much they should be worth.

Nevertheless, this is not the first large-scale drawdown in the history of cryptocurrencies, and it will not be the last. Cryptocurrencies evolve and adapt to ever-changing market conditions. As a result, all of the aforementioned investments are incredibly risky, and you should be prepared for bumpy roads ahead.

Some of these stocks can be a good play in the cryptocurrency market, and their current prices are certainly more attractive than the much higher peaks of last fall. However, it would be wise to keep your cryptocurrency investments relatively small, as the speculative sector separates the chaff from the wheat in this difficult era. Even the reasonably high-quality stocks we've talked about here are not immune to market risks. You have to weigh the promise of soaring stock prices against the very real risk of going bankrupt or liquidating.

As for bitcoin itself, we believe that in the long run, this already established blockchain will be at its best - but even so, there is no guarantee that prices will rise again. Be careful.

Comment: