GBTC the next BTC price black swan? — 5 things to know about Bitcoin this week


Bitcoin (BTC) is starting a new week that repeats November 2020 after its lowest weekly close in the past two years.

The largest cryptocurrency, like the rest of the crypto industry, remains highly vulnerable to downside risk as the exchange continues to grapple with the fallout from the FTX implosion.

Contagion is on everyone’s lips as November rolls on – like the collapse of Terra LUNA earlier this year, fears are that new victims of FTX’s massive liquidity maelstrom will continue to emerge.

The stakes are decidedly high – the initial shock may be over, but the consequences are only beginning to emerge.

These include more than just financial losses as lawmakers seek to combat FTX and urgently refocus Bitcoin and cryptocurrency regulation.

Unsurprisingly, however, price action among cryptoassets is tenuous at best – and there are many voices claiming the worst is yet to come.

Cointelegraph takes a look at some of the key factors to consider when it comes to BTC price performance this week.

FTX infection develops into GBTC

As clouds swirl over the fate of FTX executives and former CEO Sam Bankman-Fried, commentators and crypto investors alike are wondering where the contagion will hit next.

The emotion suggests that everyone expects the worst. A case in point comes in the form of Genesis Trading, part of conglomerate Digital Currency Group (DCG), which last week suspended payments in its cryptocurrency arm.

This created a number of rumors not only about Genesis’ solvency, but also about DCG’s future. The reassurances from executives failed to stop the story centered on Grayscale Bitcoin Trust (GBTC), which is also the largest institutional Bitcoin investment vehicle.

So over the weekend, the growing debate about GBTC turned into a full-blown panic about financial sustainability.

As reported by Cointelegraph, this situation was made worse by Grayscale refusing to provide address details to prove their BTC holdings for security reasons.

Doubts DCG’s more than $1 billion in debt to Genesis adds to the melting pot of suspicions.

Meanwhile, some well-known investors have added to their GBTC positions in recent weeks.

“Is GBTC the next black swan already around the corner?” trading resource Stockmoney Lizards thus he asked on Twitter.

“GBTC holds ~648k BTC. Grey’s discount reaches record 43% as FTX spreads huge uncertainty. There’s a lot of hysteria in the market and everyone is looking for a reason for 10k Bitcoin. Calm down, bear markets end in winter!”

Additional controversy centers on GBTC’s discount to the Bitcoin spot price, which is now almost 50% for the first time.

BTC/USD chart of GBTC premium vs assets. Source: Coinglass

Arthur Hayes, the former CEO of the BitMEX exchange, even noted a blog post claiming that DCG had been working with defunct trading firm Three Arrows Capital (3AC) since July to “extract value from the GBTC bounty.”

Coinbase, which vouched for Grayscale’s legitimacy last week, was a potential target for Timothy Peterson, investment manager at Cane Island Alternative Advisors.

“To those questioning all $GBTC Grayscale holdings: Why not a short $COIN @coinbase?” he he dared on Twitter.

“They are the guardians and they will be the ones who cheat. COIN is 10 times larger than GBTC; the stock will go to 0 and the executives will go to jail. You would be rich and go on vacation.”

BitGo CEO Mike Belshe, meanwhile, laid the blame for the state of GBTC and FTX at the door of the United States regulator, the Securities and Exchange Commission (SEC).

“By failing to create an ETF for Bitcoin, the SEC: – grayed out -> allowed retail GBTC trading for 5+ years – created a negative GBTC premium – forced most cryptocurrency trading out of US jurisdiction – FTX fraud should not have hit millions of Americans” he said summarized Part of a Twitter discussion.

In related FTX developments, hacked funds are on the move, with tens of thousands of Ether (ETH) being converted to BTC this weekend.

Downside risk in numbers

Bitcoin is understandably between a rock and a hard place in the current climate.

After the FTX breakout, BTC/USD failed to get a break, testing levels not seen for two years, prompting growing calls for further surrender.

The question for traders and analysts is how far this capitulation can go.

Targets include $13,500, $12,000, and even $10,000 or lower this winter, as reported by Cointelegraph.

The situation was not helped by last week’s close, Bitcoin’s weakest since November 2020 around $16,250, with fresh losses emerging since Cointelegraph Markets Pro and TradingView show.

BTC/USD 1-week candlestick chart (Bitstamp). Source: TradingView

“The volume is decreasing. Bollinger Bands are compressed on multiple time frames. Something’s got to give,” analyst Matthew Hyland warned before closing.

A look at volatility on the daily chart showed that the Bollinger Bands had widened, testing the lower band at the time of writing on November 21 – a suggestion that lower levels are to come amid increased volatility.

BTC/USD 1-day candlestick chart with Bollinger Bands (Bitstamp). Source: TradingView

Short-term bullish targets, however, include a return to the most recent CME Bitcoin futures gap around $16,500.

Fellow trader and analyst Crypto Tony urged caution on bearish sentiment in BTC/USD despite trading below $16,000.

“I’m looking for some distance down the range before I get excited short,” he said he said Twitter followers of the day.

“Right now we’re still in the same boat as we’ve been for the last few days….Patience.”

BTC/USD chart. Source: Crypto Tony/Twitter

Meanwhile, Axel Kibar took a more conservative outlook, warning that history could be repeated in the form of Bitcoin repeating the losses from the beginning of the year.

One of two graphics uploaded to Twitter that day described As a “reminder of the recent consolidation and the possibility of it turning into a bearish continuation chart pattern”.

Kibar previously claimed that “when the price stays below 18K, the chances of a return to $13,000 are high.”

BTC/USD chart. Source: Axel Kibar/Twitter

The retreating inflation is going through Bitcoin

While inflation will be a major topic of discussion for anyone involved in risk assets in 2022, it has taken a backseat to cryptocurrency.

FTX and its contagion put more pressure on price performance than the year’s macro triggers in the short term, but behind the scenes, the global economic picture offers interesting signals.

In the United States, inflation has already been seen to be retreating, but new figures from Europe show that Germany, the Eurozone’s largest economy, is now following suit.

The Producer Price Index (PPI) data released on November 21 came in below expectations and even turned negative instead of rising further.

“Compared to September 2022, producer prices decreased by 4.2% in October 2022. This is the first monthly decrease since May 2020 (0.4% in April 2020)”, – the official press release says.

German Producer Price Index (PPI) chart. Source: Federal Statistical Office (Destatis)

If the inflation picture changes sharply for the better, the chances of a return on risky assets should increase incrementally. Meanwhile, the US dollar continues to struggle, with two-decade highs still out of reach.

For a popular analytical resource Trading gameIt’s “game over” for the US dollar index (DXY), which broke the 100-day moving average for the first time since April 2021.

USD Index (DXY) 1-day candlestick chart with 100 MA. Source: TradingView

New difficulty at an all time high as miners sales cool

Even all-time highs, not lows, are difficult to accept among bitcoins in the current climate.

Under the hood, Bitcoin is busy expanding its network security – but doubts about the numbers persist.

In the most recent automated correction on November 20, the difficulty of the Bitcoin network increased by 0.51%, reaching a new record.

An overview of the basics of the Bitcoin network (screenshot). Source: BTC.com

Mining difficulty is a reflection of the competition between miners. Currently, the metric is rising despite the decline in BTC price action, which in turn suggests that some institutions are applying more hashing power to the network and are able to overlook shrinking profit margins.

Some warn that a “capitulation” may occur for the less resilient. Reacting to the new difficulty level, Colin talks to Krypto he called is the “perfect storm” for a miners’ revolt.

“Only the strongest will survive this extreme pressure,” he said.

Even so, miners have been selling less than their one-year averages in recent days, suggesting a potential reduction in the urgency to reduce inventories.

Data from on-chain analytics platform CryptoQuant’s Miner Position Index (MPI) shows a bounce back to normal after FTX.

Bitcoin Miner Position Index (MPI) chart. Source: CryptoQuant

Timing of the bottom

During the recent crypto market, those around are bracing for a long and lasting return to glory.

Related: Bitcoin Sees Record Stock-to-Flow Miss — BTC Price Model Maker Brushes Off FTX ‘blip’

BTC/USD is at a new macro low, popular Twitter account Mustache shows that it is now suitable weeks past the most recent all-time high.

At 30 months, compared to both 2018 and 2014, the time for this event to occur is longer.

BTC/USD chart. Source: Mustache/Twitter

In addition, a mustache marked Bitcoin’s MVRV-Z score indicator is now approaching levels synonymous with each macro bottom.

“Everyone is wondering where Bitcoin’s bottom might be. The MVRV Z-Score has always proven to be very accurate in the past and could answer this question,” he wrote alongside a screenshot of the MVRV-Z Score chart.

“When Z-Score broke out of the green channel, the bottom was for $BTC. We are very close.”

BTC/USD MVRV-Z Account Annotated Chart. Source: Mustache/Twitter

Comparing the frames four years ago, when BTC/USD hit $3,100 in December 2018, a colleague of the Bleeding Crypto account said that the price action was only beginning the bottoming process.

“Did you know that in 2018, after you start giving up, it takes 5 weeks to finally hit rock bottom?” he revealed.

“Then it took 4 months of QUESTION PA before we saw the first candle of God. Today we barely started the 2nd week. This is a marathon, not a sprint. Relax, it will pass a little.”

BTC/USD 1-week candlestick chart (Bitstamp). Source: TradingView

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 action involves risk, you should do your own research when making a decision.