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This is a black swan event, and the entire crypto sphere is reeling. The oft-dreaded capitulation of Bitcoin bulls has begun, and the world’s premier cryptocurrency is now likely heading toward the $13,000 price level.
FTX’s Liquidity Spiral and Binance’s Powerplay
Binance just eliminated one of its foremost competitors in a seemingly perfectly orchestrated move that is sending veritable tsunamis across the entire crypto sphere and has smashed Bitcoin to new bear market lows.
WOW
Per CoinDesk, Alameda research has $14.6 billion of assets, against $8b of liabilities.
For assets: $3.66b FTT, $2.16b “FTT collateral”, $3.37b crypto ($292m SOL, $863m “locked SOL”), $134m USD & $2b “equity securities.
Most net equity tied in completely illiquid altcoins.
— Dylan LeClair 🟠 (@DylanLeClair_) November 2, 2022
As we detailed in a post earlier today, the crypto exchange FTX has been under a near-constant public glare ever since it emerged that Alameda Research, a crypto trading firm owned by FTX’s founder Sam Bankman-Fried (SBF), maintained outsized exposure to the FTT token on its balance sheet. As a refresher, holders of the FTT token receive rewards and discounts on FTX’s trading fees. FTX maintains FTT’s value by using a third of its trading commissions to buy back FTT coins, which are then burnt.
As part of Binance’s exit from FTX equity last year, Binance received roughly $2.1 billion USD equivalent in cash (BUSD and FTT). Due to recent revelations that have came to light, we have decided to liquidate any remaining FTT on our books. 1/4
— CZ 🔶 Binance (@cz_binance) November 6, 2022
The founder of Binance, Zhao “CZ” Changpeng, cited Alameda’s outsized exposure to FTT over the weekend to announce that his crypto exchange firm will liquidate “any remaining FTT on our books” while adding the qualifier that this liquidation will take place in a manner so as to minimize “market impact.” Of course, given the ongoing carnage that has now enveloped Bitcoin and other major cryptocurrencies, the fidelity of this assurance, in hindsight, has been found wanting.
Crypto exchange FTX saw around $6 billion of net withdrawals in 72 hours before tuesday morning, per SBF.
— unusual_whales (@unusual_whales) November 8, 2022
For its part, FTX tried to curtail the damage by tweeting that it could easily cover all client holdings, with GAAP audits certifying over $1 billion in excess cash. FTX also offered to buy Binance’s FTT holdings in a private exchange. However, the fatal blow had already been inflicted by that time. As fears of a “bank run” began to grow, FTX started facing elevated withdrawal requests. In fact, as per SBF, the exchange saw a record $6 billion of net withdrawals over the past 72 hours.
At the time of writing, the FTT token is down around 75 percent over the past 24 hours. Given the relatively widespread use of this token as collateral across the crypto sphere, fears are growing by the hour that the utter implosion in the FTT token's price is going to unleash an onslaught of margin calls that will decimate value across the DeFi space.
FTX customers could “Probably, Possibly, Eventually, Maybe” get their money back, according to the Wall Street Journal
— Stock Talk Weekly (@stocktalkweekly) November 8, 2022
Meanwhile, FTX has turned to Binance as it faces a historic liquidity crunch. However, Binance's proposed acquisition of FTX is by no means set in stone and can still fall apart, hence, the ongoing volatility.
It is hardly surprising, therefore, that Bitcoin just created a new low of $17,603 during the ongoing bear market cycle.
Bitcoin is Now in a Capitulatory Tailspin
Bitcoin miners have been in the capitulation territory – as captured by the Puell multiple – for quite some time. The latest price drop is now likely to precipitate capitulatory action, where miners dump their Bitcoin reserves just to maintain operations.
Update - Total liquidation in long $BTCUSD positions reached new high today $162.53 million , the highest since mid Jun 2022. chart analysis. pic.twitter.com/AYeb7Y7WAX
— US. Dollar Smile "Financial Terminal" (@Forexmkts) November 8, 2022
Moreover, total liquidations in Bitcoin just reached the highest level since the early summer crypto carnage.
Bitcoin unrealized profit and loss is showing a washout in long-term holders. We have entered the capitulation value zone (red) seen only once every 4 years in the past. pic.twitter.com/VzpLL778RR
— Charles Edwards (@caprioleio) November 7, 2022
Additionally, Bitcoin’s unrealized profits and losses have also entered the capitulatory territory.
When #BTC peaked in the 2013 Bull Market, it took BTC 413 days to bottom
When $BTC peaked in the 2017, it took BTC 364 days to bottom
It's been 333 days since the November 2021 peak
These figures suggest a BTC bottom should take place in the next 1-3 months#Crypto #Bitcoin
— Rekt Capital (@rektcapital) October 5, 2022
Now the question is: how low will Bitcoin go? We had noted in a post back in October that Bitcoin was able to carve out a bottom 413 days after reaching a zenith back in 2013. In 2017, this process took 364 days. Based on these two data points, we can conclude that Bitcoin is likely to bottom out between the 09th of November and the 28th of December 2022. Against today’s literal washout, this prognostication is even more prescient given that Binance’s formal offer to acquire FTX is expected to take a few days at least.
As to how low Bitcoin is expected to go in the ongoing bearish cycle, readers should note that the world’s premier cryptocurrency has crashed by around 80 percent relative to its preceding all-time high in each of its previous bearish phases. Relative to its current all-time high of $69,000, recorded back in November 2021, Bitcoin is expected to reach at least $13,800 if this regime holds true this time as well.
How low do you think Bitcoin will go now? Let us know your thoughts in the comments section below.
