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

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

Bitcoin (BTC) starts a new week still playing out November 2020 after its lowest weekly close in two years.

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

Contagion is the world on everyone’s lips as November progresses – just like the Terra LUNA collapse earlier this year, it is feared that new victims of FTX’s gigantic liquidity vortex will continue to emerge.

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

These include issues beyond just financial losses, as lawmakers try to tackle FTX and place renewed emphasis on urgent Bitcoin and crypto regulation.

With that, it’s no wonder that price action across cryptoassets is tenuous at best – and there are many voices arguing that the worst is yet to come.

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

FTX contagion turns into GBTC

As clouds swirl over the fate of FTX’s executives and former CEO, Sam Bankman-Fried, commentators and crypto investors alike wonder where the contagion will strike.

The sentiment suggests that everyone expects the worst. One example comes in the form of Genesis Trading, part of the Digital Currency Group (DCG) conglomerate, which last week halted payments at its crypto lending arm.

This not only set off a series of rumors about Genesis’ solidity, but also about DCG’s future. Concerns from executives have failed to stem the narrative, which has also focused on the largest institutional Bitcoin investment vehicle, Grayscale Bitcoin Trust (GBTC).

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

As Cointelegraph reported, this was exacerbated by Grayscale’s refusal to provide address details to prove its BTC reserves, allegedly for security-related reasons.

Suspicions over a billion dollars that DCG owes Genesis, the melting pot of concerns is increasing.

At the same time, some well-known investors have added to their GBTC positions in recent weeks.

“Is the Next Black Swan GBTC Already Around the Corner?” trading resource Stockmoney Lizards that is asked on Twitter.

“GBTC holds ~648k BTC.Grayscale discount to record 43% as FTX spreads great uncertainty. Lots of hysteria in the market and everyone looking for 10k Bitcoin cause. Keep calm, bear markets end in winter!”

Further contention is focused on GBTC’s discount to the Bitcoin spot price, which is now nearly 50% for the first time ever.

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GBTC Prize Vs. asset inventory vs. BTC/USD Chart. Source: Coinglass

Arthur Hayes, former CEO of exchange BitMEX, even flagged a July blog post that ventured DCG had worked with defunct trading firm Three Arrows Capital (3AC) to “extract value from the GBTC premium.”

After confirming Grayscale’s legitimacy last week, Coinbase was the potential target of Timothy Peterson, chief investment officer at Cane Island Alternative Advisors.

“To all who question $GBTC grayscale holdings: Why not short $COIN @coinbase?” he dared on Twitter.

“They are the custodian and they would be the ones committing fraud. COIN is 10x the size of GBTC; stocks would go to 0 and managers would go to jail. You would be rich and on vacation.”

Mike Belshe, CEO of BitGo, meanwhile, laid the blame for GBTC’s plight – and FTX’s – firmly at the door of the US regulator, the Securities and Exchange Commission (SEC).

“By failing to create an ETF for bitcoin, the SEC allowed grayscale -> GBTC trading to rip off retail for 5+ years – created the negative GBTC premium – forced most crypto trading out of US jurisdiction – allowed FTX’s fraud to hit millions of Americans it shouldn’t have done,” he in summary in part of a Twitter discussion.

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

Downside risk in numbers

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

BTC/USD has failed to catch a break since the FTX exploded, testing levels not seen in two years and seeing increasing calls for further capitulation.

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

As Cointelegraph reported, targets include $13,500, $12,000 and even as low as $10,000 or less this winter.

The situation was not helped by the latest weekly close, Bitcoin’s weakest since November 2020 at around $16,250, with fresh losses emerging since, data from Cointelegraph Markets Pro and TradingView show.

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

“Volume is falling. Bollinger Bands are squeezing on many time frames. Something has to give,” analyst Matthew Hyland warned before the end.

A look at volatility on the daily chart showed Bollinger Bands expanding with price testing the lower band at the time of writing on November 21 – a suggestion that lower levels amid increased volatility are in store.

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BTC/USD 1-Day Candlestick Chart (Bitstamp) with Bollinger Bands. Source: TradingView

Short-term upside targets nonetheless included a return to the recent CME Bitcoin futures gap around $16,500.

Fellow trader and analyst Crypto Tony also called for restraint over bearish sentiment on BTC/USD despite the pair trading below $16,000.

“Looking for a close low before I get excited short,” he told Twitter followers on the day.

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

BTC/USD Annotated Chart. Source: Crypto Tony/Twitter

Aksel Kibar, meanwhile, took a more conservative view, warning that history could repeat itself in the form of Bitcoin repeating losses from earlier in the year.

One of two charts uploaded to Twitter that day he described as a “reminder of the recent consolidation and the possibility of it becoming a bearish continuation chart pattern.”

Kibar had previously argued that “the longer the price remains below 18K, the greater the chances” of a return to $13,000.

BTC/USD Annotated Chart. Source: Aksel Kibar/Twitter

Receding inflation overtakes Bitcoin

While inflation has been the main topic of discussion for everyone involved in risk assets in 2022, for crypto, the issue has receded.

FTX and its contagion have pushed price developments more acutely than this year’s macro trigger on short time frames, but behind the scenes the global economic picture gives interesting signals.

It was already seen that inflation in the US was on the way back, but new figures from Europe indicate that the eurozone’s largest economy, Germany, is now following suit.

The producer price index (PPI) data released on November 21 came in below expectations and even retreated, turning negative instead of growing further.

“Compared to September 2022, producer prices fell by 4.2% in October 2022. This was the first month-on-month decrease since May 2020 (-0.4% in April 2020),” an official press release said.

German producer price index (PPI) chart. Source: Federal Statistical Office (Destatis)

Should the inflation picture change dramatically for the better, the chances of a decline in risk assets should increase accordingly. The US dollar, meanwhile, continues to struggle, with previous twenty-year highs still out of reach.

For popular analytics resource Game of TradesIt’s game over for the US dollar index (DXY), which broke through its 100-day moving average for the first time since April 2021.

US dollar index (DXY) 1-day candlestick chart with 100 MA. Source: TradingView

New difficulty all-time high as miner sale cool

Even all-time highs, rather than lows, have trouble gaining acceptance among Bitcoiners in the current climate.

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Under the hood, Bitcoin has been busy expanding its network security – but concerns about the numbers persist.

At the last automated readjustment on November 20, the Bitcoin network difficulty increased by 0.51% to reach a new record high.

Basic overview of Bitcoin network (screenshot). Source: BTC.com

Mining difficulty is a reflection of the competition among miners. Currently, the metric is rising despite BTC price action falling, which again suggests that some entities are deploying more hash power to the network and are able to overlook shrinking profit margins.

For the less resistant, however, “capitulation” may occur, some warn. In reaction to the new difficulty, Colin talks Crypto called it’s the “perfect storm” for miner upheaval.

“Only the fittest will survive this extreme pressure,” he added.

Despite this, miners have sold less than their one-year average in recent days, indicating a potential reduction in the immediate need to reduce reserves.

Data from the chain analysis platform CryptoQuants Miner Position Index (MPI) shows a peak from after FTX is now returning to the norm.

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

Hours the bottom

Those around during the latest crypto bear market are bracing for a long and drawn-out return to glory.

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

BTC/USD is now an appropriate number of weeks after the last record high to set a new macro low, popular Twitter account Mustache shows.

At 30 months, the time has actually come for the event to occur compared to both 2018 and 2014.

BTC/USD Annotated Chart. Source: Mustache/Twitter

Mustache as well the flag Bitcoin’s MVRV-Z score indicator, one that is now approaching levels synonymous with every macro bottom.

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

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

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

Comparing timeframes from four years ago, when BTC/USD bottomed out at $3,100 in December 2018, fellow account Bleeding Crypto said the price action has still only just begun its bottoming process.

“Did you know it took 5 weeks to finally bottom out when we started capitulating in 2018?” he revealed.

“Then it took 4 months of BORING PA before we saw the first light of God. We barely started week 2 today. This is a marathon, not a sprint. Get comfortable, it will take a while.”

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