Bitcoin (BTC) is starting a new week by repeating November 2020 after the lowest weekly close in two years. This week we share some key factors to keep in mind when it comes to BTC and altcoin price performance. Here are the details…
FTX crisis infects GBTC
As dark clouds roll over the fate of FTX executives and former CEO Sam Bankman-Fried, commentators and crypto investors alike are wondering where the epidemic will strike next. The emotion suggests that everyone expects the worst. One example is Genesis Trading, part of the Digital Currency Group (DCG) holding, which last week stopped payments in its crypto lending arm. This started a series of rumors not only about Genesis’ solvency, but also about DCG’s future. Therefore, over the weekend, a growing discussion about GBTC turned into a complete panic over financial viability.
Grayscale’s refusal to provide address details to prove BTC reserves “for security reasons” made the situation worse. The more than $1 billion that DCG owes Genesis raises suspicion. Stockmoney Lizards described GBTC as “the next black swan thing”. Also, experts are focusing on GBTC discounting the Bitcoin spot price, which is now almost 50 percent for the first time.
Arthur Hayes, former CEO of BitMEX exchange, pointed to a blog post in July suggesting DCG is working with Three Arrows Capital (3AC) to “get value from GBTC premium.” Coinbase, which vouched for Grayscale’s legitimacy last week, was the potential target of Timothy Peterson, investment manager at Cane Island Alternative Advisors. Meanwhile, BitGo CEO Mike Belshe has blamed GBTC – and FTX’s – on the US regulator, the Securities and Exchange Commission (SEC).
Downside risk in numbers
Bitcoin is understandably somewhere between a rock and a hard place under current circumstances. BTC/USD failed to catch a break as FTX exploded, testing levels not seen in two years, and increasing calls for further capitulation. The question for traders and analysts is how far this capitulation can go. According to experts, winter targets include $13,500, $12,000, and even $10,000 or less.
Bitcoin’s latest weekly close at $16,250, its weakest level since November 2020, did not help the situation. However, short-term upside targets included a return to around $16,500 in the most recent CME Bitcoin futures open position. Analyst Crypto Tony has similarly called for restraint on the bearish trend in BTC/USD even though the pair is trading below $16,000. “I’m looking for a close below the low range before I start getting excited about selling,” he told his followers.
Meanwhile, Aksel Kibar adopted a more conservative perspective. He warned that history could repeat itself as Bitcoin repeats its losses earlier in the year. One of the two charts uploaded to Twitter that day described it as “a reminder about the latest consolidation and the possibility of this becoming a bearish chart pattern.” Kibar had previously argued that “the longer the price stays below $18, the higher the chance of a return to $13,000.”
Withdrawn inflation surpasses Bitcoin (BTC)
Inflation has been the main topic of discussion for anyone involved in risky assets in 2022, while for crypto the issue has been in the background. The FTX crisis suppressed price performance more severely than the macro triggers of the year in short time frames. However, behind the scenes, the global economic picture is giving interesting signals. Inflation in the US was already seen to be pulling back. However, new figures from Europe show that Germany, the largest economy in the eurozone, is now following the same path.
Producer Price Index (PPI) data released on November 21 came in below expectations and even came to the point of decline and turned negative instead of growing. If the inflation picture changes dramatically for the better, the chances of recovery of risky assets should increase incrementally. Meanwhile, the US dollar continues to struggle, with the previous two decades’ highs still not firmly reached. According to popular analytics resource Game of Trades, it’s “game over” for the US dollar index (DXY) to break past its 100-day moving average for the first time since April 2021.
New challenge in BTC mining hits all-time high
Even all-time highs are struggling to gain acceptance among Bitcoin users in the current climate. In the background, Bitcoin was busy expanding its network security. But doubts about the numbers remain. As a result of the most recent automatic recalibration on November 20, Bitcoin network difficulty increased by 0.51 percent, reaching a new record high.
Mining difficulty is a reflection of the competition between miners. Currently, the metric is rising even though the BTC price action is down, suggesting that some assets are distributing more hash power to the network, ignoring the declining profit margins. However, some warn that “capitulation” may occur for those who are less resistant. Colin Talks Crypto described it as the “perfect storm” for miner mayhem in response to the new difficulty level.
Despite this, miners have been selling less than their one-year average in recent days. This indicates a potential reduction in the need for urgent reserve reduction. Data from on-chain analytics platform CryptoQuant’s Miner Position Index (MPI) shows a spike after FTX is now back to normal.
Has the bottom level arrived for BTC?
Those around during the last crypto bear market are tightening their belts for a long and grueling return to victory. As popular Twitter account Mustache has shown, BTC/USD has a decent number of weeks to push its all-time high to a new macro low. At 30 months, the time has actually expired for this event to happen compared to both 2018 and 2014. Mustache also pointed to Bitcoin’s MVRV-Z points indicator. This indicator is currently approaching levels synonymous with every macro low.
Comparing timeframes four years ago, when BTC/USD dropped to $3,100 in December 2018, Bleeding Crypto account said, however, that price action has only just begun the process of bottoming out.
What will the Fed meeting mean for Bitcoin?
Finally, this week, on November 23, the Fed will release the FOMC minutes. Therefore, according to some, the crypto market may be preparing for another blow this week. FED minutes are expected to deal a major blow to financial markets. Any move in the traditional financial market will resonate in the cryptocurrency market.
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