Since seeing the chaos of the FTX crash, Plucky Bitcoin has held steady, gathering strength to rally to dizzying highs of $30,000 in 2023.
Battered Bitcoin has been unresponsive since being hit hard by the FTX crash, taking a deep breath before plunging to the depths of $5,000.
Place your bets, spin the wheel.
The world’s dominant cryptocurrency has certainly been uncharacteristically silent over the past two weeks, with Bitcoin stalling between $15,770 and $17,350 following the FTX-induced market mini-crash in November.
What happens next is anyone’s guess.
“The question we need to ask ourselves now is: Are there any sellers in this market? In my opinion, no, not that many,” said Jacob Sainsbury, co-founder of Pluto, a retail investor services firm.
According to Sansbury, most overleveraged miners, who tend to be large holders of bitcoin, have exited their positions to pay off debts that fund equipment and operations in traditional currencies.
In fact, Bitcoin’s recent lull could be attributed to fewer tokens being available for sale: Coinglass data shows that exchanges are holding 1.97 million tokens, down sharply from 2.33 million at the start of the year.
Major unloading has already occurred; according to Glassnode, the seven-day real loss on Bitcoin investments in November was $10.16 billion, the fourth-largest loss on record for this metric, as investors were forced to exit long-term positions.
The cryptocurrency has already lost more than 60% in 2022 and is set to post its first annual loss since 2018.
Bob Ras, co-founder of exchange and digital asset firm Sologenic, said that based on on-chain data, many remaining investors are putting their bitcoins in offline “cold storage,” which should raise the floor price to around $16,000.
“Unless there are more surprises in the market, it’s hard to imagine BTC going much lower,” he added.
Ras believes that if it weren’t for the high-profile collapses of cryptocurrency players FTX, Celsius and Terra this year, the price of Bitcoin would now be close to $25,000.
But this is cryptocurrency, and more surprises are likely to come, with many potential sell-off triggers on the horizon.
The first potential risk is that, as mining becomes more expensive, more bitcoin miners are forced to sell their holdings to make ends meet.
“Miners as a group start to become unprofitable below $20,000, so we’re below (that) point,” said Ben McMillan, chief investment officer at IDX Digital Assets.
CrytpoQuant’s miner reserve metric, which tracks the amount of bitcoin held in miners’ wallets, has dropped by around 7,722 bitcoins since last November.
Market participants also pointed to concerns about Grayscale Bitcoin Trust, the world’s largest bitcoin fund with $10.9 billion in assets. Digital Currency Group, the parent company that owns Genesis Trading, owes $575 million to Genesis’ crypto-lending arm, the DCG CEO told shareholders on Nov. 22.
Grayscale Bitcoin Trust’s discount to its net asset value is at an all-time low of 48%, and shares haven’t traded at a premium since March 2021, according to Coinglass data.
DCG said last month that problems with the Genesis lending business had no impact on DCG or its subsidiaries, while Grayscale insisted its business was business as usual and its underlying assets were unaffected.
“It could be another shoe,” McMillan said, referring to the possibility that Grayscale could run into financial trouble. “That said, if Bitcoin can hold the $15,000 level through the DCG test, that would be a strong indicator heading into 2023.
A more hawkish-than-expected Federal Reserve at its final meeting of the year on Wednesday could further dampen risk appetite and the outlook for bitcoin, cryptocurrency watchers said.
Scenarios where Bitcoin jumps to $30,000 or falls to $5,000 in 2023 are the unlikely ones flagged by VanEck and Standard Chartered, respectively.
On the technical front, several analysts noted indicators that Bitcoin could find support between $16,000 and $16,800.
Eddie Tofpik, director of technical analysis at ADM Investor Services, said the cryptocurrency could also encounter resistance near $17,490, warning that any long-term rally could be challenging.
“Any time we see a rally, it’s one step up and then two or three steps down,” he said.
Arcane Research analyst Vetle Lunde said long-term bets could be attractive after November’s turmoil.
Still, uncertainties remain.
“Keep in mind that large pullbacks are often followed by long periods of directionless markets, filled with apathy and unfathomable second-guessing,” Lund added.
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