Jump or fall? $30k or $5k? Play bitcoin roulette
(Our weekly analysis of the wild world of cryptocurrencies)
By Medha Singh and Lisa Pauline Mattackal
Dec 13 (Reuters) – Plucky bitcoin has held steady since seeing off the chaos of the FTX collapse, rallying its strength to rally towards the dizzying heights of $30,000 in 2023.
Battered bitcoin has not reacted since being crushed by the FTX collapse, taking a deep, ragged breath before plunging towards the $5,000 lows.
Place your bets, spin the wheel.
The world’s dominant cryptocurrency has certainly been uncharacteristically muted over the past two weeks, treading water between around $15,770 and $17,350 in the dire aftermath of the FTX-induced mini-crash in November.
What happens next is anyone’s guess.
“The question we have to ask now is: Are there any sellers left in this market? In my opinion, no, there aren’t many left,” said Jacob Sansbury, co-founder of retail investor services company Pluto.
Sansbury believes most leveraged miners, who tend to be large holders of bitcoin, have exited positions to pay off debt taken out in traditional money to finance their equipment and operations.
In fact, bitcoin’s recent calm may be due to the fact that there are fewer coins to sell: the amount held on exchanges for trading stands at 1.97 million, Coinglass data shows, down sharply from 2.33 million at the start of the year.
Great relief has already taken place; November saw a 7-day realized loss of $10.16 billion in bitcoin investments as investors were forced to exit long positions, the fourth-largest loss on record by that measure, according to Glassnode data.
The cryptocurrency has already fallen more than 60% in 2022, and will see its first annual loss since 2018.
Many remaining investors are placing their bitcoin in offline “cold storage” according to on-chain data, which should bolster a price floor around $16,000, said Bob Ras, co-founder of Sologenic, an exchange and digital asset firm.
“Barring more surprises in the market, it’s hard to imagine BTC going significantly lower,” he added.
Ras believes that if it weren’t for the high-profile collapse of crypto players FTX, Celsius and Terra this year, the price of bitcoin would be close to $25,000 by now.
But this is crypto, and more surprises may well be in store, with a number of potential sell-off triggers on the horizon.
THE BEAR’S TALE
The first potential danger is the risk that more bitcoin miners will be forced to sell their holdings to stay afloat, as mining becomes increasingly expensive.
“Miners as a group start to become unprofitable below $20,000, so we’re below (that) point,” noted Ben McMillan, chief investment officer at IDX Digital Assets.
CrytpoQuant’s mining reserve indicator, which tracks the amount of bitcoin held in miners’ wallets, has fallen by around 7,722 bitcoin since November.
Market players also pointed to concerns about Grayscale Bitcoin Trust, the world’s largest bitcoin fund with $10.9 billion in assets. Parent company Digital Currency Group, which owns Genesis Trading, owes $575 million to Genesis’ crypto-lending arm, DCG’s CEO told shareholders on Nov. 22.
Grayscale Bitcoin Trust’s discount to net asset value is at a low of 48% and shares have not traded at a premium since March 2021, Coinglass data showed.
DCG said last month that problems at Genesis’ lending business had no impact on DCG and its subsidiaries, while Grayscale maintained it was business as usual and its underlying assets were unaffected.
“This could be the other shoe to drop,” McMillan said, referring to the possibility of Grayscale running into financial trouble. “That said, if bitcoin can hold the $15,000 line through the DCG exercise, it will be a strong indicator going into 2023.
A more hawkish-than-expected Federal Reserve at its final meeting of the year on Wednesday could further erode risk appetite and bitcoin’s outlook, crypto watchers said.
GETTING TECHNICAL
The scenarios of bitcoin jumping to $30,000 or falling to $5,000 in 2023 were long-term possibilities flagged by VanEck and Standard Chartered, respectively.
When it comes to the technicals, several analysts pointed to indicators showing that bitcoin may have found support between $16,000 and $16,800.
The cryptocurrency could also encounter resistance around the $17,490 level, said Eddie Tofpik, head of technical analysis at ADM Investor Services, warning that any long-term rally is likely to be challenging.
“Every time we see a rally, it’s one step up and then two or three steps down,” he said.
Vetle Lunde, an analyst at Arcane Research, said long-term bets could be appealing in the wake of the November turmoil.
Nevertheless, uncertainty prevails.
“Remember that massive drawdowns tend to be followed by a prolonged directionless market filled with apathy and inscrutable second-guessing,” Lunde added.
(Reporting by Lisa Pauline Mattackal and Medha Singh in Bengaluru; Editing by Pravin Char)
