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Bitcoin continues to show remarkable resilience in the face of one negative event after another in the cryptocurrency space. However, storm clouds continue to gather, suggesting that Bitcoin’s current rally may be short-lived.
First, Genesis rocked the cryptosphere earlier this week when it officially entered Chapter 11 bankruptcy in the US. As part of the bankruptcy filing, Genesis disclosed 100,000 creditors and aggregate liabilities ranging from $1.2 billion to $11 billion, including a $769.5 million loan from Gemini.
Of course, Genesis’ lending arm, formally known as Genesis Global Capital, announced in November 2022 that $175 million was trapped in the now-defunct FTX exchange. Concurrent with this announcement, Genesis Global Capital seized the funds of 340,000 Gemini Earn users and suspended all loan originations and redemptions. As an upgrade, under Gemini’s Earn program, users can lend their crypto holdings to Genesis to earn interest. Of course, the SEC recently took a dim view of this program, accusing Genesis and Gemini of essentially offering “unregistered securities.” Despite additional vectors of contagion stemming from Genesis’ bankruptcy, Bitcoin remained largely unaffected.
CONFIRMATION THAT BINANS IS DISCONNECTED FROM SWIFT FOR MULTIPLE COUNTRY USD TRANSFERS: https://t.co/PdUrq5Cghf pic.twitter.com/O6Yum7749g
– DIRTY BUBBLE MEDIA: THE WALLED GARDEN (@MikeBurgersburg) January 21, 2023
Then, yesterday, rumors spread like wildfire that Binance had been disconnected from SWIFT, the global banking messaging service.
Binance said Signature Bank will only handle user transactions above $100,000 as the bank reduces its exposure to digital asset markets. Some individual users will not be able to use SWIFT bank transfers to buy or sell cryptocurrency with USD for amounts less than USD 100,000.
— Wu Blockchain (@WuBlockchain) January 22, 2023
However, Binance soon clarified that Signature bank will only handle cryptocurrency transactions of $100,000 or more in the future, excluding the vast majority of retail customers. Nevertheless, Binance’s access to the SWIFT network remains intact:
“Signature Bank, one of our fiat banking partners, has advised that starting February 1, 2023, they will no longer support any of their cryptocurrency customers with trading amounts of less than $100,000. This is the case for all of their cryptocurrency exchange customers. As a result, some individual users They will not be able to use SWIFT bank transfers to buy or sell cryptocurrency for USD for less than USD 100,000.”
Since Signature Bank is a major financial institution serving the cryptocurrency space, the negative effects of this move on Bitcoin and other cryptocurrencies cannot be denied.
I see two scenarios:
1️⃣Imza is just an empty bank and falling apart, so this is no Burger FUD.
2️⃣Imza is under regulatory pressure and US dollar transfers for retail are suspended to reduce risk. If so, then the concern is the spread of these restrictions to other banks/exchanges.
— kamikaz Ξ (@kamikaz_ETH) January 22, 2023
Nevertheless, Bitcoin showed only a muted reaction to this development and is now trading at $22,740 from a recent peak of $23,362. However, we believe more weakness lies ahead.
25-delta put-call skew measures the implied volatility (indicator of demand) of 25-delta puts versus calls. As an upgrade, an in-the-money option has a delta of 50. Thus, 25-delta options have about a 25 percent chance of ending up in the money. The chart above shows bitcoin’s 180-day expiration curve for 25-delta options. Notice that the skew has just turned positive, indicating an increase in demand for put options. Also, note that the last time this measure had a positive reading was just before Bitcoin’s major low in April 2022. In our view, this is a compelling case for further downward price movement.
As Bitcoin rose this week, many market participants declared that a cyclical bottom was forming. We continued to express our doubts about this measure. While we expect Bitcoin to go lower in the first quarter of 2023, our belief will only be strengthened if the world’s leading cryptocurrency can experience an average loss of at least 84.5 percent in a bear market, which equates to $69,000. around $11,000 price level.