Bitcoin (BTC) is starting a new week that still repeats November 2020 after its lowest weekly close in two years.
The largest cryptocurrency, like the rest of the crypto industry, remains highly vulnerable to downside risk as it deals with the collapse of the FTX exchange.
The world is on everyone’s lips as November rolls around – like the collapse of Terra LUNA earlier this year, the fear is that new victims of FTX’s spiritual cycle will continue.
The stakes are decidedly high – the initial shock may be over, but the consequences are only just beginning.
These are issues that go beyond just financial losses, as lawmakers try to deal with FTX and put a new emphasis on speedy regulation of Bitcoin and crypto.
Nevertheless, it’s no surprise that price action across cryptoassets is weak at best – and there are many voices arguing that the worst is yet to come.
Cointelegraph looks at some of the key factors this week when it comes to BTC price performance.
FTX infection turns into GBTC
As clouds cloud the fate of FTX executives and former CEO, Sam Bankman-Fried, commentators and crypto investors alike wonder where the contagion will strike next.
Sentiment suggests that everyone is expecting the worst. One case comes in the form of Genesis Trading, part of the Digital Currency Group (DCG) conglomerate, which last week suspended payments on its crypto-lending arm.
This sparked a series of rumors not only about the Genesis deal, but also about the future of DCG. The executives’ reassurances failed to stem the tide, which also focused on the largest institutional Bitcoin investment vehicle, Grayscale Bitcoin Trust (GBTC).
So, over the weekend, a huge debate about GBTC erupted into a complete panic about financial prosperity.
As Cointelegraph reported, this was made worse by Grayscale refusing to provide address details to prove its BTC reserves, for security-related reasons.
Suspects The more than $1 billion that DCG owes to Genesis adds to the melting pot of doubt.
Also, some prominent investors have added to their GBTC positions in recent weeks.
“Is the next GBTC black swan already around the corner?” source of trading Stockmoney Lizards in this way asked on Twitter.
“GBTC holds ~648k BTC. Grayscale drops from record 43% as FTX spreads huge uncertainty. Lots of hysteria in the market and everyone looking for a reason for 10k Bitcoin. Keep calm, bear markets are ending for winter!”
Another controversy is the discount of GBTC on the spot price of Bitcoin, which is now almost 50% for the first time.
Arthur Hayes, the former CEO of exchange BitMEX, even pointed to a blog post from July that he claimed DCG had worked with defunct trading firm Three Arrows Capital (3AC) to “squeeze value out of the GBTC premium.”
Confirming Grayscale’s legitimacy last week, Coinbase became a potential target for Timothy Peterson, chief investment officer at Cane Island Alternative Advisors.
“For all $GBTC Grayscale owners asking: Why not short $COIN @coinbase?” that one ventured on Twitter.
“They are the guardians and they will be the ones doing the fraud. COIN is 10x the size of GBTC; the stock will go to 0 and the managers will go to jail. You would be rich and go on vacation.”
Mike Belshe, CEO of BitGo, meanwhile laid the blame for GBTC’s – and FTX’s – plight squarely at the door of the US regulator, the Securities and Exchange Commission (SEC).
“By not implementing an ETF for bitcoin, the SEC: – allowed gray scale -> GBTC trading to burn stores for 5+ years – created a negative GBTC premium – forced most crypto trading outside of US jurisdiction — let the FTX fraud affect millions of Americans. It shouldn’t happen,” he said shortened in part of a Twitter discussion.
In related FTX developments, hacked funds from the exchange are on the move, with tens of thousands of Ether (ETH) converted to BTC this weekend.
The risk of reduction in numbers
Bitcoin is perceived to be between a rock and a hard place under the current circumstances.
BTC/USD failed to hold a breakout as FTX broke out, testing levels not seen in two years and mounting calls for another capitulation.
The question for traders and analysts is how far that capitulation can go.
As Cointelegraph reported, targets this winter include $13,500, $12,000 and even as low as $10,000 or less.
The situation was not helped by the latest weekly close, Bitcoin’s weakest since November 2020 around $16,250, with fresh losses appearing since then, Cointelegraph Markets Pro and TradingView data show.
“The noise is decreasing. Bollinger Bands move over multiple time frames. Something has to give,” analyst Matthew Hyland warned before closing.
A look at the volatility on the daily chart showed that the Bollinger Bands are widening with price testing the lower band at the time of writing on November 21 – a suggestion that lower levels will come amid increased volatility.
However, the above short-term targets refer to the most recent CME Bitcoin futures gap around $16,500.
Fellow Crypto trader and analyst Tony similarly called for bearish sentiment on BTC/USD despite the pair trading below $16,000.
“I’m looking for a close below the lows of the range before I start getting short-lived,” he said said Twitter followers per day.
“It’s true we’re still in the same boat as the last few days really…. Patience.”
Meanwhile, Aksel Kibar took a more conservative view, warning that history might repeat itself in the form of Bitcoin repeating the losses from the beginning of the year.
One of two maps uploaded on Twitter that day to explain as “A reminder of the latest merger and the possibility that it will become a persistent chart pattern.”
Kibar had previously argued that “the longer the price stays below 18K the more the chances of a return to $13,000 increase.”
Inflation is beyond Bitcoin
While inflation is the main topic of discussion for everyone involved in risk assets in 2022, for crypto, the issue has taken a back seat.
FTX and its contagion put more pressure on price performance than the year’s macros in the short term, but behind the scenes the global economic picture provides interesting signs.
Inflation in the United States was already seen to be on the rise, but new figures from Europe suggest that the Eurozone’s largest economy, Germany, is now following suit.
The Producer Price Index (PPI) data released on November 21 was below expectations and even reversed, excluding negative growth.
“Compared to September 2022, producer prices decreased by 4.2% in October 2022. This was the first month-on-month decrease since May 2020 (–0.4% in April 2020 de),” an official press statement said.
If the inflation picture changes significantly for the better, the chances of recovering the risk capital should gradually increase. Meanwhile, the US Dollar continues to struggle, with twenty-year highs still firmly out of reach.
For popular analytical resource Trading Gameit was “game over” for the US dollar index (DXY), which broke its 100-day moving average for the first time since April 2021.
New all-time high intensity as mineral sales cool
Even all-time highs, rather than lows, are currently having difficulty gaining acceptance among Bitcoiners.
Under the hood, Bitcoin is busy expanding the security of its network – but doubts about the numbers persist.
In the last automatic adjustment on November 20, the Bitcoin network difficulty increased by 0.51 percent and achieved a new record.
Mining difficulty is a reflection of the competition between miners. Currently, even though BTC price action is down, the metric is rising, which in turn suggests that some entities are leveraging more hashing power on the network and could be looking at shrinking profit margins.
For the less resistant, however, “capitulation” may emerge, some warn. Commenting on the new high challenge, Colin Talks Crypto they called it’s a “perfect storm” for the miners’ revolt.
“Only the strongest will survive this intense pressure,” he added.
Despite this, miners have been selling lower than their one-year average in recent days, indicating a potential reduction in the need for immediate reserves reductions.
Data from on-chain analytics platform CryptoQuant’s Market Position Index (MPI) shows that a bit of post-FTX is now returning to the norm.
Those around during the last crypto bear market are riding high for a long, long comeback.
Related: Bitcoin Sees Record Stock-to-Flow Loss — BTC Price Model Creator Brushes Off FTX ‘blip’
BTC/USD is now a decent number having crossed the week from its most recent high to make a new macro low, popular Twitter account Mustache points out.
In 30 months, it is actually time for that event to happen compared to both 2018 and 2014.
Mustache except flagged Bitcoin’s MVRV-Z score indicator, which is now close to the levels equivalent to every macro sub.
“Everyone is wondering where Bitcoin’s bottom might be. The MVRV Z-Score has always proven to be very accurate in the past and can answer this question,” he wrote alongside a screenshot of the MVRV-Z Score chart.
“When the Z-Score broke through the green channel, the bottom was $BTC. We are very close.”
Comparing the times to four years ago, when BTC/USD hit $3,100 in December 2018, fellow analyst Bleeding Crypto said that the price action was just beginning its bottoming process.
“Did you know it’s been 5 weeks since we started winning in 2018?” that one to explain.
“Then it took 4 months of BORING PA before we saw God’s first candle. We barely started week 2 today. This is a marathon, not a sprint. Relax, it’s going to be a long time.”
The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move has a risk, you should do your research when making a decision.