GBTC Next BTC Price Black Swan? - 5 things you need to know about Bitcoin this week

Bitcoin is still repeating what happened in November 2020 after it started the new week with its lowest weekly close in two years.

Bitcoin, like the rest of the crypto industry, remains very vulnerable to downside risks, continuing to deal with the implosion of exchange FTX .

Contagion is on everyone’s lips as November wears on – just like the Terra LUNA crash earlier this year, there are fears that new victims of FTX’s massive liquidity vortex will continue to surface.

The stakes are clearly high - the initial shock may have passed, but the consequences are only just beginning to be felt.

The problems go beyond financial damage as lawmakers try to address FTX and reemphasize emergency regulation of bitcoin and cryptocurrencies.

Given this, there is little doubt that crypto asset price action has been subdued at best — with many voices arguing that the worst is yet to come.

Cointelegraph analyzes some of the major factors involved in BTC’s price performance this week.

FTX crisis spreads to GBTC

With the fate of FTX executive and former CEO Sam Bankman-Fried clouded, commentators and cryptocurrency investors alike are speculating where the crisis will play out next .

Market sentiment suggests that everyone is expecting the worst. A case in point is Genesis Trading, owned by Digital Currency Group (DCG), which halted withdrawals at its crypto lending unit last week.

This not only sparked a flurry of rumors about Genesis' solvency, but also speculation about DCG's future. Reassurance from executives has failed to stop the narrative, which also focuses on the largest institutional investment vehicle for bitcoin, the Grayscale Bitcoin Trust (GBTC).

As a result, the debate surrounding GBTC intensified over the weekend and quickly turned into a full-blown panic.

As Cointelegraph reported , the situation was made worse by Grayscale’s refusal to provide address details to prove its bitcoin reserves, allegedly for security reasons.

Doubts were fueled by suspicions that DCG owed Genesis $1 billion.

Meanwhile, some prominent investors have increased their GBTC positions in recent weeks.

“Is the next black swan GBTC around the corner?” trading resource Stockmoney Lizards asked on Twitter.

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

GBTC Premium vs Asset Holdings vs BTC/USD Chart Source: Coinglass

Former BitMEX CEO Arthur Hayes even retweeted a July blog post boldly stating that DCG had worked with bankrupt trading firm Three Arrows Capital (3AC) to “extract value from the GBTC premium.”

Coinbase vouched for Grayscale’s legitimacy last week, becoming a potential target for Cane Island Alternative Advisors investment manager Timothy Peterson.

He ventured to write on Twitter: "All those who question the holdings of GBTC Grayscale: why not short Coinbase's COIN?"

Meanwhile, BitGo CEO Mike Belshe blamed the GBTC and FTX incidents on the U.S. regulator, the Securities and Exchange Commission (SEC).

“By failing to create an ETF for Bitcoin, SEC: Allowing Grayscale -> GBTC trading to erode retail for 5+ years – creating a negative GBTC premium – forcing most crypto trading outside US jurisdiction – —Let FTX’s fraud hit millions of Americans in a way that it never should have happened,” he concluded as part of the Twitter discussion.

In a related FTX development, the exchange's hacked funds were moving, with tens of thousands of ETH being converted to Bitcoin over the weekend.

Digital downside risk

Given the current circumstances, Bitcoin is understandably caught between a rock and a hard place.

Since the FTX debacle, BTC/USD has failed to break out, testing levels not seen in two years and sparking growing calls for further capitulation.

The question for traders and analysts is how far this capitulation will go.

According to Cointelegraph, price targets for this winter include $13,500, $12,000, and even as low as $10,000 or less.

Bitcoin's recent weekly close didn't help the situation, reaching its lowest level since November 2020 at around $16,250 before fresh losses emerged, according to data from Cointelegraph Markets Pro and TradingView.

Looking at the volatility on the daily chart, it can be seen that at the time of writing on November 21st, the Bollinger Bands were widening and the price was testing the lower Bollinger Bands – suggesting that amidst increased volatility, the lower Bollinger Bands Levels are coming.

BTC/USD 1-day candle chart (Bitstamp), Bollinger Bands Source: TradingView

Nonetheless, short-term upside targets include a return to the latest CME Bitcoin futures gap around $16,500.

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

“I’m looking for a close below the low of the range before I start excitedly shorting,” he told fans on Twitter that day.

BTC/USD Annotated Chart Source: Crypto Tony/Twitter

Aksel Kibar, meanwhile, took a more conservative view, warning that history could repeat itself with Bitcoin repeating its losses from earlier this year.

He tweeted two charts that day, one of which he described as a "reminder of the latest consolidation and its potential to become a bearish continuation chart pattern."

Kibar previously said that "the longer the price is below 18,000, the more likely it is to return to $13,000".

BTC/USD Annotated Chart Source: Aksel Kibar/Twitter

Fading Inflation Skips Bitcoin

While inflation has been a major topic of discussion for anyone involved in risk assets in 2022, it has taken a backseat when it comes to cryptocurrencies.

In the short-term, FTX and its contagion are putting more pressure on price performance than this year's macro triggers, but behind the scenes, the global economic situation is providing interesting signals.

Inflation in the United States has already started to fall , but new data from Europe shows that Germany, the euro zone's largest economy, is now following in its footsteps.

The producer price index (PPI) data released on November 21 was lower than expected, and even fell back, turning negative instead of further growth.

"The Producer Price Index fell by 4.2% in October 2022 compared to September 2022. This is the first month-on-month decline since May 2020 (-0.4% in April 2020)," an official press release say.

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

If the inflation situation improves significantly, the chances of a rebound in risky assets should increase simultaneously. Meanwhile, the dollar continues to struggle, with previous 20-year highs still out of reach.

Popular analytics resource Game of Trades sees "game over" for the U.S. dollar index (DXY), which broke above its 100-day moving average for the first time since April 2021.

US Dollar Index (DXY) 1-day candlestick chart, 100-day moving average Source: TradingView

New mining difficulty hits all-time high as miner sales cool

In the current environment, even all-time highs (rather than lows) are difficult for Bitcoin investors to accept.

Behind the scenes, Bitcoin has been busy expanding its network security — but concerns about the numbers remain.

In the latest automatic adjustment on November 20, the difficulty of the Bitcoin network increased by 0.51%, hitting a record high.

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

Mining difficulty is a reflection of competition among miners. Currently, the indicator is rising despite downward BTC price action, which in turn suggests that some entities are deploying more computing power to the network and are able to ignore declining profit margins.

However, some have warned of a possible "capitulation" if there is less resilience. Faced with the new high difficulty, Colin Talks Crypto called it a "perfect storm" of miner upheaval.

"Only the strongest can survive such extreme stress," he added.

Still, miners have sold less in recent days relative to the one-year average, suggesting that the urgent need to draw down reserves may be less.

Data from on-chain analytics platform CryptoQuant’s Miner Position Index (MPI) shows a spike following the FTX crash that has now returned to normal levels.

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

Bottom timing begins

People who lived through the last crypto bear market are preparing for a long comeback.

Popular Twitter account Mustache says BTC/USD has now had a decent few weeks to make a new macro low.

Compared to 2018 and 2014, the 30-month period is actually time to bottom.

BTC/USD Annotated Chart Source: Mustache/Twitter

Mustache also pointed to Bitcoin’s MVRV-Z score indicator, which is currently approaching the level of each macro bottom.

“All wondering where the bottom for Bitcoin might be. The MVRV Z-Score has been proven to be very accurate in the past to answer that question,” he wrote alongside a screenshot of the MVRV-Z Score chart.

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

Another account, Bleeding Crypto, compared the time frame of four years ago, when BTC/USD bottomed at $3,100 in December 2018, while saying that, nonetheless, the price action has only just begun the bottoming process.

“You know what? After we started capitulating in 2018, it took five weeks to finally bottom out,” he revealed .

"Then it took us 4 months to see the first God candle. We just started week two today. It's a marathon, not a sprint. Take it easy, it's going to be a while."

BTC/USD weekly candle chart (Bitstamp) Source: TradingView