The black swan FTX and its offshoots, coupled with the cost of energy for mining, continue to put downward pressure on Bitcoin and cryptocurrency prices, all the more damaging as the stock market has bounced back following the short squeeze by Thursday October 13. We ignore this difficult context and establish an unfiltered technical diagnosis of the cryptocurrency market.
A trust issue that will be resolved in the coming weeks
The failure of the FTX platform, the fraudster who is Sam Bankman-Fried persona, the powerful movement of distrust of cryptocurrencies which is followed through a very large amount of withdrawals from centralized platforms (CEX) is a black swan.
For the financial markets, the black swan is the worst fundamental event that can happen, as its exceptional nature carries systemic riski.e. a risk of collapse of the market in question due to unpreparedness to deal with it.
In fact, by definition, it is a market risk that was not listed among the potential risks at the beginning of the year. In the current case, FTX was still regarded a month ago as a “high level and safe” player and its CEO, as a personality beneficial to the ecosystem.
Gold, this gentleman turns out to be a black sheep (no relation to the swan), a dirty trickster which ultimately finds itself sidelined for the sake of the future of the crypto ecosystem.
But do not dream, it will take a long time to erase the crisis of confidence that this event has triggered. In turn, the downward trend in the price of cryptocurrencies that has been going on since autumn 2021 is developing further, making mining farms less and less profitable.
It therefore becomes urgent to stabilize the total market capitalization of cryptocurrencies, in order to be able to start an upward trend in 2023, on solid structural foundations.
Meanwhile, the holders balance continues to climb, confidence in the CEX is still not making a big comeback.
Figure 1: Chart juxtaposing the price of Bitcoin with holder and trader balances
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At a technical level, volume and participation data are the key to evaluating a possible remobilisation of purchases
To measure the evolution of general confidence in cryptocurrencies, data on volume, engagement and participation are the most relevant within the technical analysis tools of the financial markets.
The evolution of deposits and withdrawals on centralized platforms (CEX), the measurement of the Open Interest (OI) on cryptocurrency futures contracts, the Asset under Management (AUM) on cryptocurrency ETFs as well as the evolution of the liquid assets with institutional managers.
The latest data from these metrics does not yet show a return from available liquidity to cryptocurrencies, but there is still a stabilization that shows that the post-failure bleeding of FTX has stopped.
I remain convinced that the available liquidity (their amount among institutional traders is close to the record following the bursting of the speculative bubble 2.0 at the beginning of the century) will be partly reinvested in the cryptocurrency market as soon as the trust has entered, a trust that first of all requires transparency accounting and financial solvency of the main players in the ecosystem.
To conclude on a graphical level, the price of Bitcoin (BTC) must overcome the old lows of last June to resume an uptrend. be resistance at $19,000/$20,000.
Figure 2: Graph showing the evolution of the share of cash among institutional managers
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Sources: Figure 1 – TradingView; Figure 2 – Bank of America Monthly Survey
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