Dec 13 (Reuters) – Plucky Bitcoin has held steady since emerging from the chaos of the FTX collapse, gathering its strength to rally to the dizzying heights of $30,000 in 2023.
Battered Bitcoin has been unresponsive since it was hit by the FTX collapse, taking a deep breath before plunging to the bottom of $5,000.
Place your bets, spin the wheel.
The world’s dominant cryptocurrency has certainly been unusually subdued over the past two weeks, treading water between around $15,770 and $17,350 as the sinister wake of November’s FTX-induced market mini-crash played out.
One can only guess what happens next.
“The question we have to ask ourselves now is: are there still sellers in this market? I don’t think there are that many left,” said Jacob Sansbury, co-founder of retail investment services firm Pluto.
Sansbury believes that most heavily indebted miners, who are typically large holders of Bitcoin, have exited their positions to pay off debts taken on in traditional money to fund their equipment and operations.
In fact, the recent calm in bitcoin could be due to there being fewer coins to sell: the amount held for trading on exchanges stands at 1.97 million, data from Coinglass shows, down from a sharp 2.33 million beginning of the year.
Big dumps have 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 recorded after the measure, according to Glassnode data .
The cryptocurrency is already down more than 60% in 2022 and is set to post 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 floor price of around $16,000, said Bob Ras, co-founder of Sologenic, an exchange and digital asset company .
“Barring more surprises in the market, it’s hard to imagine BTC going significantly lower,” he added.
Ras believes the price of Bitcoin would now be close to $25,000 if it weren’t for the high-profile collapse of crypto players FTX, Celsius, and Terra this year.
But this is crypto, and more surprises could be in store, with a number of potential sell triggers on the horizon.
THE STORY OF THE BEAR
The first potential danger is the risk that more bitcoin miners will be forced to sell their holdings to stay afloat as mining becomes more 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 miner reserve indicator, which tracks the amount of bitcoin in miners’ wallets, has fallen by around 7,722 bitcoin since November.
Market participants also raised concerns about the Grayscale Bitcoin Trust, (GBTC.PK), the world’s largest Bitcoin fund with assets of $10.9 billion. Parent company Digital Currency Group, which owns Genesis Trading, owes Genesis’ crypto lending arm $575 million, DCG’s CEO told shareholders Nov. 22.
Grayscale Bitcoin Trust’s discount to its net asset value is at an all-time low of 48%, and shares have not traded at a premium since March 2021, data from Coinglass showed.
DCG said last month that problems in Genesis’ lending business had no impact on DCG and its subsidiaries, while Grayscale claimed it was trading as usual and the underlying assets were unaffected.
“This could be the other shoe to drop,” McMillan said, referring to the possibility of Grayscale running into financial difficulties. “That means if Bitcoin can sustain the $15,000 line through the DCG workout, that would be a strong indicator for 2023.
A more hawkish Federal Reserve than expected at its final meeting of the year on Wednesday could further erode bitcoin’s risk appetite and prospects, crypto watchers said.
The scenarios in which Bitcoin would jump to $30,000 or fall 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 face resistance around $17,490, said Eddie Tofpik, head of technical analysis at ADM Investor Services, warning that any long-term rally would likely pose a challenge.
“Every 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.
Nevertheless, there is uncertainty.
“Remember that massive drawdowns are usually followed by a prolonged directionless market filled with apathy and unfathomable doubt,” Lunde added.
Reporting by Lisa Pauline Mattackal and Medha Singh in Bengaluru; Editing by Pravin Char
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