GBTC next BTC price black swan?  – 5 things you need to know in Bitcoin this week

GBTC next BTC price black swan? – 5 things you need to know in Bitcoin this week

Bitcoin (BTC) is kicking off another week that continues to repeat November 2020 after the lowest weekly close in two years.

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

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

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

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

Therefore, it is no wonder that the price action between cryptoassets is weak at best – and there are plenty of voices arguing that the worst is yet to come.

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

FTX contamination turns into GBTC

As clouds swirl over the fate of FTX’s executives and ex-CEO, Sam Bankman-Fried, commentators and crypto investors are wondering where the contagion will strike next.

Sentiment suggests that everyone expects the worst. A good example is the form of Genesis Trading, part of the conglomerate Digital Currency Group (DCG), which last week halted payouts to its crypto lending arm.

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

For example, over the weekend, a growing debate about GBTC mushroomed into a full-blown panic about financial resilience.

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

suspicions more than $1 billion DCG owes Genesis adds to the melting pot of doubts.

At the same time, some well-known investors have increased their GBTC holdings in recent weeks.

“Is the next black swan GBTC just around the corner?” trading source Stockmoney Lizards early on Twitter.

“GBTC has ~648,000 BTC. Grayscale discount to a record 43% as FTX spreads great uncertainty. Lots of hysteria in the market and everyone is looking for the reason of 10,000 Bitcoin. Keep calm, the bear markets are ending in winter!”

Further discussion focuses on GBTC’s discount to Bitcoin’s spot price, which is now approaching 50% for the first time.

GBTC premium vs. asset positions vs. BTC/USD chart. Source: Coinglass

Arthur Hayes, former CEO of BitMEX, even flagged a July blog post that ventured that DCG had teamed up with defunct trading company Three Arrows Capital (3AC) to “capture value from the GBTC bounty.”

After vouching for Grayscale’s legitimacy last week, Coinbase was the potential target for Timothy Peterson, investment manager at Cane Island Alternative Advisors.

“To anyone questioning $GBTC Grayscale holdings, why not short $COIN @coinbase?” he bold on Twitter.

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

Mike Belshe, CEO of BitGo, meanwhile, laid the blame for the situation of GBTC – and FTX – firmly on the US regulator, the Securities and Exchange Commission (SEC).

“By failing to create an ETF for bitcoin, the SEC: – allowed grayscale trading -> GBTC broke retail for 5+ years – created the GBTC negative premium – forced most crypto trading outside the US jurisdiction – let FTX’s fraud affect millions of Americans it shouldn’t have been,’ he summarized as part of a Twitter discussion.

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

Downward risk in numbers

Bitcoin is understandably between a rock and a hard spot under the current circumstances.

BTC/USD has failed to catch a break since FTX blew up, testing levels not seen in two years and handling a growing call for further capitulation.

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

As Cointelegraph reported, the 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 at around $16,250, with fresh losses since then, data from Cointelegraph Markets Pro and TradingView show.

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

“Volume decreases. Bollinger Bands squeeze on many time frames. Something has to be given,” analyst Matthew Hyland warned before closing.

A look at volatility on the daily chart showed Bollinger Bands expanding with price testing of the lower band at the time of writing on November 21 – suggesting that lower levels will come amid heightened volatility.

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

Short-term upside targets nevertheless include a return to the last CME Bitcoin futures gap of around $16,500.

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

“Looking for a close under the range lows before I start shorting enthusiastically,” he said told Twitter followers on the day.

“At the moment we are still in the same boat as the past few days actually…. Patience.”

BTC/USD annotated chart. Source: Crypto Tony/Twitter

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

One of two charts uploaded to Twitter on the day it was uploaded described as a “Reminder of the last consolidation and the possibility of it becoming a bearish continuation chart pattern.”

Kibar had previously argued that “the longer the price stays below 18K, the better the chance” 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 conversation for anyone involved in risky assets in 2022, the issue has faded into the background for crypto.

FTX and its contagion have weighed on price performance more acutely than the near-term macro triggers of the year, but behind the scenes, the global economic picture is giving interesting signals.

Inflation in the US already appeared to be easing, but new data from Europe suggests that the eurozone’s largest economy, Germany, is now following suit.

Producer Price Index (PPI) data released on Nov. 21 fell short of expectations and even declined, turning negative rather than continuing to grow.

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

German producer price index (PPI) chart. Source: Federal Bureau of Statistics (Destatis)

Should the inflation picture change dramatically for the better, the likelihood of a recovery in risk assets should increase accordingly. The US dollar, meanwhile, continues to struggle, with previous 20-year highs still clearly out of reach.

For popular analytics resources Game of tradingis it “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 level ever high as miner sales cool

Even all-time highs, rather than lows, struggle to be accepted by Bitcoiners in the current climate.

Under the hood, Bitcoin has been busy expanding its network security, but doubts about the numbers remain.

At the last automated adjustment on November 20, Bitcoin network difficulty increased by 0.51% to reach a new all-time high.

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

The difficulty of mining is a reflection of the competition between miners. Currently, the statistic is rising despite BTC price action falling, which in turn suggests that some entities are deploying more hash power to the network and may be overlooking declining profit margins.

For less resilient, however, “capitulation” could follow, some warn. Reacting to the New Difficulty, Colin Talks Crypto called it’s the “perfect storm” for miner unrest.

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

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

Data from on-chain analytics platform CryptoQuant’s Miner Position Index (MPI) shows a spike from after FTX is now returning to normal.

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

Time the bottom

Those who were around during the last crypto bear market are gearing up for a long and drawn-out return to glory.

Related: Bitcoin Sees Record Stock-to-Flow Miss – BTC Price Model Maker Wipes FTX ‘blip’

BTC/USD is now an appropriate number of weeks past its last all-time high to post a new macro low, popular Twitter account Mustache shows.

After 30 months, it’s basically time for that event to happen compared to both 2018 and 2014.

BTC/USD annotated chart. Source: Mustache/Twitter

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

“Everyone is wondering where the Bitcoin bottom could 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.

“Whenever the Z-Score fell out of the green channel, the bottom was for $BTC. Were very close.”

BTC/USD MVRV-Z Score annotated chart. Source: Mustache/Twitter

Comparing timeframes from four years ago, when BTC/USD hit a low of $3,100 in December 2018, meanwhile, fellow account Bleeding Crypto said price action is just beginning to bottom out.

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

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

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

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move carries risk, you should do your own research when making a decision.