Bitcoin Fundamental Briefing, November 2022

Bitcoin Fundamental Briefing, November 2022


Today, guys, I would like to start our discussion with the final words of our previous monthly report:

All major BTC analysis agencies, such as GlassnodeBloomberg IntelligenceArcane research,LookIntoBitcoin, a lot of private analysts start talking about the Pivot. Media gives more headlines on this subject as well. 

As it was correctly been said above – When the majority of the market believes that price must go lower, price then reverses to the upside away from the bear market lows.

But why you’ve decided that most people wait for downside continuation? Based on information above it is vice versa – the majority expects the pivoting.

But who said that investors will run in BTC first? Low volatility and rising interest it is not only about possible upside breakout. So, maybe we also should consider this scenario?

Of course, you could argue how it was possible to know about FTX and all these stuff? But FTX accident was a logical continuation of fundamental processes in the US economy that keep cryptocurrency market under pressure, and second – own crypto market problems, high volatility, lack of regulation etc. That, actually, shapes the overall structure, type of investors, type of positions they hold etc. 

We suggest that FTX echo will sound for a long time across the market and full results of this collapse are yet to be known. Recently it has become known that FTX also is stuck in political affairs, sponsoring Democratic party and taking part in supposed money laundering of the US government in a way of Ukraine’s military help, that partially have been spent on financing of Dems elections programme. Rumors are different now. 

We do not want to dive in this dirt. Mostly our task is find out what consequences FXT has for the market, and whether it makes sense to invest in BTC now, or, in general when to invest. Or maybe it makes sense to not invest at all?

New market expectations

Let’s first take a look on how market expectations have changed in general, compares to October. If October was full of positive expectations and inspiration – now sentiment stands quite different.

According to common opinion, the current bear market began at the turn of Q1-Q2 2022. Grayscale analysts in a recent publication have already outlined the end of the recession for the period from November to December 2022. But the events related to the investigation of FTX Trading Ltd (from November 7 to November 11) at the moment had an impact on a new drop in BTC that currently is coiling around  $16,000-$17,000.

The price of BTC is one of the key indicators of the current state of the crypto market, in this regard, it is important to understand the expectations of investors regarding the future price of this asset.

The interviewed managers and founders of crypto projects expect a further drawdown of BTC. The average expected price is $11,479, which is 31% lower than the current BTC level . The maximum announced price is 17,000 (1 respondent), the minimum is 0 (3 respondents).

Another vital question is stablecoins. Coins like USDT/USDC/BUSD are among the most important assets and settlement tools between participants of the crypto market. In terms of capitalization, they are among the top 10 coins in the entire crypto market. The key feature is the declared peg to US dollar, achieved through a special asset security structure. It is obvious that decoupling from the equilibrium price of any of the main stablecoins will have fatal consequences for the market.

91% of the survey participants believe that stablecoins will not lose their peg to the dollar against the background of current events.

Concerning personal investing tactics, we could say that sentiment here is mostly positive, despite expectations of deeper drop of BTC.  The survey showed that more than half of top managers plan to increase their crypto assets and no one plans to reduce them.

⅔ (66%) of the surveyed top project managers are expected to expand their crypto portfolio over the next month, ⅓ respondents — will not take any active actions. At the same time, none of the respondents chose the option “No, I plan to reduce my current crypto portfolio” among the possible answers.

Expectations of the average price on average correlate with the assumed tactics of actions – among those who responded about expanding the portfolio, the estimate of the future “stable value” (the bottom BTC price is $12,361 versus $9,764 among those who abstained from active investment actions and from exiting investments.

So, despite the general panic, the survey results allow us to conclude about the optimistic expectations of investors: the current recession is not over yet, however, it opens up investment opportunities that respondents intend to take advantage of by expanding their positions in the crypto market.

But not to be hasty. Obviously investors are waiting for specified levels to make investments….

Grayscale suggests the end of bearish market in Nov-Dec 2022

Analysts study market cycles to predict when a bear market will come to an end. Generally, market cycles include four phases: accumulation, markup, distribution and a mark-down. For Bitcoin, the market cycle occurs over four years, or 1,275 days. The last phase usually relates to the bear market.

According to Grayscale, the crypto bear market commences when the realized price of Bitcoin surpasses its market price. Grayscale defines realized price as:

“The sum of all assets at their purchase price or realized market capitalization, divided by the market capitalization of the asset which provides a measure of how many positions are in or out of profit.”

The realized price of BTC surpassed the market price on June 13, 2022. The table below shows the prices of Bitcoin when its market price was greater than the realized one.

It is interesting to note that by July 12, the cycle had completed 1,198 days. Since the entire cycle takes 1,725 days, by that date there were four months until the realized price would cross above the BTC market price.

However, at the end of the four months, Bitcoin would need another 222 days to reach its previous all-time high. This means that from July, it would take a total of five to six months for the bear market to end. The graph summarizes the expected trajectory of the current crypto cycle.

If the current market cycle takes a similar structure as the 2012 and 2016 cycles, and if Grayscale’s findings are accurate, then the bear market could end between November 2022 and December 2022.

The contrasting situations between the 2021 crypto bull run and the 2022 bear market have baffled crypto investors. Analysts believe that the current bear market will end between November 2022 and December 2022, with a possible bull run starting between the end of 2024 an early 2025.

Statistics is good stuff, but what’s about the FED?

Those who read our regular FX and Gold weekly reports could skip this part. This is big bulk of data to cover in BTC report, that’s why we only mention here the major conclusions that come from recent Fed Minutes publication. (For more details read this FX weekly Report)

In two words, a bit deeper look on Fed minutes totally dispells the myth of so-called positive shifts on the markets, such as “inflation is defeated”, Fed is pivoting”, “employment is strong”, “Consumption is strong”. The Fed desire to slowdown the pace is based not on improvements of overall situation, but with coming to threshold level. Since the rate change doesn’t bring any feasible results, it makes no sense to rise it anymore. The PPI decrease mostly suggests the starting of deflationary processes due to real economy sector slowdown. Which is better see on example of Germany. Fed constantly tells about tension on jobs market despite that numbers are positive. Based on Initial+Continues claims analysis, the breakeven point in NFP data should come sooner rather than later. And many traders could treat it as more dovish factor for the Fed that makes USD even weaker. It could be so, if we would have low inflation, but we don’t. With high inflation hardly it lets the Fed to relax. After few months, these things should become obvious which should hurt stock market. In general, the situation when inflation remains high but Fed can’t rise rate anymore is very bad combination for the USD. But since the situation in other countries stands even worse, we do not expect big changes of USD value to other currencies.

For BTC this discover hardly could be called positive. Additionally to FTX turmoil we have unfriendly external fundamental background that makes any reversal on the market hardly possible any time soon. 

The FTX Legacy

In the wake of the FTX fallout, the confidence and financial position of Whales and Bitcoin old hands have been shaken by the event.

As the dust settles following the FTX fallout, and with a few more weeks of data available, we are able to assess whether recent market weakness has shaken the confidence of Bitcoin holders.

  • Exchange outflows, which have continue to break historical records.
  • Whales who are more than likely underwater on their position in aggregate.
  • Long-term holders, whom are currently spending coins at a historically significant rate.

outflows from exchanges and into investor wallets of almost all sizes have been historical in scale, as BTC holders seek safety in self-custody. As a result, the 30-day net position change of all exchange balances has reached a new all-time-high for outflows this week.

BTC is currently flowing out of exchanges at a rate of -172.7k BTC per month, eclipsing the previous peak set following the June 2022 sell-off.

With spot prices currently at $16.2k, this is the the first time since March 2020 that this Whale cohort has been at an unrealized loss. In response, Whales have actually been depositing coins to exchanges, with an excess of between 5k and 7k BTC per day in net inflows over the past week.

This magnitude of financial pain is being expressed across the wider market, with one of the largest spikes in Realized Loss in the 2020-22 cycle. A peak daily value of -$1.45B in realized loss was locked in this week, ranking as the fourth largest in history.

During bear markets, significant and sustained upticks in old coin spending is often a signal of reduced conviction, fear, and capitulation amongst this more experienced cohort.

The Spent Volume Age Bands (SVAB) metric shows that just over 4% of all spent volume was sourced from coins older than 3-months this week, which is the highest level in 2022. This relative magnitude is coincident with some of the largest in history, often seen during capitulation events and wide scale panic events.

The spent BTC volume older than 6-months has hit also the fifth highest value over the last five years. Over 130.6k BTC aged 6-months or more were spent on 17-Nov alone, with the 7-day average now at 50.1k BTC per day.

This suggests that there is significant uncertainty, which is prompting the changing of hands, and or shuffling of coins by longer-term investors.

Finally, the behavior of Long-Term Holders inspection, which accounts for the entities that are statistically the least likely to spend in the face of volatility. Their supply has declined by 84,560 BTC post-FTX, which remains one of the most significant declines in the last year. As shown in the chart below, LTH supply declines have exceeded 100k BTC in three back-to-back months through May, June and July this year. This makes the current decline notable, but not the largest, although it is still underway.

Thus, across many metrics that describe the behavior of Bitcoin longer-term investors, several are signalling that a non-trivial volume of spending, and divestment is underway. As noted last week, a slow-down and retrace of these metrics would signify this may be a short-term event, however with each passing day that these trends persist, it becomes increasingly plausible that a wider scale reduction in confidence is in play.

The Whale cohort are in a mode of net distribution at present, sending between 5k and 7k in excess BTC into exchanges. Meanwhile, the flight of coins off exchanges by almost all cohorts is at an all-time high. The whirlwind impact of the FTX collapse continues to play out, and it remains to be seen just how extensive the shake-up to investor confidence has been, Glassnode concludes.

The Grayscale discount is growing

On November 17, the decline in Bitcoin trust (BTC) quotes from Grayscale Investments relative to NAV reached 42.69%.

We already have mentioned in our Telegram channel that Grayscale also has liquidity problems, and Grayscale is a project of Genesis, that together with Gemini has liquidity problems as well. So, discount to NAV is not a result of delay in shifting of Trust into ETF, but liquidity problems. GBTC assets are now valued around $10.16 Bln. Based on a NAV discount you could suggest what the hole in the budget they do have…

Additional pressure on the quotes has come from  the disposal of the asset by GBTC large holders like Celsius Network and Three Arrows Capital due to liquidity problems that led to their bankruptcy.

“There is a lot of concern and news reports and rumors about DCG, the parent of Grayscale,” Bloomberg Intelligence analyst James Seyffart said. “I think people just want to get away from anything that could be coming down, even if it’s only a remote possibility.”

Although some analysts suggest that this is temporal – Grayscale Is the ‘Cash Cow’ of Silbert’s Empire, Ark’s Wood Says

Bloomberg: Mark Mobius Sees Bitcoin Down at $10,000 in ‘Dangerous’ Crypto Market

The crypto rout has room to run, according to veteran fund manager Mark Mobius. 

The co-founder of Mobius Capital Partners LLP said in an interview Monday in Singapore that his next target for Bitcoin is $10,000. He added he wouldn’t invest his own cash or client money in digital assets as “it’s too dangerous.”

“But crypto is here to stay as there are several investors who still have faith in it,” said Mobius, who spent more than three decades at Franklin Templeton Investments. “It’s amazing how Bitcoin prices have held up” despite the FTX fallout, he added.

Some forecasters think Bitcoin may sink back to levels prevailing prior to bull run

Options data from Deribit show a high number of outstanding Bitcoin put contracts — so-called open interest — at a strike price of $10,000 for end-December expiry. The concentration of options bets suggests derivative investors anticipate that level could be tested.

Bitcoin Options Dec. 30 expiry

BloombergCoinbase bonds become a junk– In the wake of the spectacular meltdown of Sam Bankman-Fried’s crypto empire, many investors are looking for early warning signs that may have foretold the contagion that was about to unfold. One possibility? Coinbase Global Inc.’s junk bonds.

 In particular, “something that really grabbed attention” back in May was Coinbase’s noting that clients could be treated as general unsecured creditors if the company went bankrupt.

This caught a lot of people by surprise and raised several questions, according to Havens: “Bankruptcy? What were they seeing, hearing, feeling that compelled the lawyers to include that statement at that time,” he said. And secondly: “Clients. Wait, what? We may be pari passu to bondholders, not segregated as we’d be at a regular exchange?”

The notes fell from about 92 cents in Jan to 53 cents

The yield on Coinbase’s bonds is currently roughly between 13 and 15%. “We think this fully reflects ongoing crypto uncertainty and negative technicals, with few buyers willing to step in with what remains of 2022,” Havens wrote in a note Monday.

“The bonds are reflecting the animal spirits that are going on right now,” he said in the phone interview. “And that is the fear that has engulfed crypto.”

And just to not overload report, I put here few most interesting links.  You could read them if you want but headlines in general is enough to understand the content:

Vast Majority of Retail Investors in Bitcoin Lost Money, BIS Says

Bitcoin Futures Slide Below Spot Price as FTX Fallout Spreads

JPMorgan Team Says Crypto Markets Face ‘Cascade’ of Margin Calls

  • JPM strategists say crypto deleveraging set to take few weeks
  • Their analysis sees potential Bitcoin floor of around $13,000

Bitcoin’s History Shows Room for Drop to $13,000

The current slump is far from the worst

Earlier Bitcoin Bear Markets Show Price Hasn’t Hit Bottom

relates to Earlier Bitcoin Bear Markets Show Price Hasn’t Hit Bottom

Etc., etc., etc…


Here we consider only Monthly and Weekly time frames as they better show the long-term picture. There are two major things on the monthly chart. First is, downside breakout of 20K support area. Once this level has been broken, price as entered in a “new old” range of 0-20K. Second – after the drop below 20K, price just stands here, showing no attempt to return back or turn breakout to the fake one. This is bearish sign. Now price has no major support areas, as last 5/8 all-time Fib level has been broken around Yearly Pivot Support 1 (YPS1) @ 26K area.

Now we have only natural support/resistance levels, based on previous tops and bottoms. And the nearest one stands around 13-14K area that perfectly fits to mentioned above market’s expectations. We use it as nearest target. But could market drop further? No doubts, it could, moving down into the relatively narrow range of 3-13 K. US crisis is just a beginning, and major problems are yet to happen.  Besides, as public as institutional investors slowly take pink glasses off and start to see that maybe cryptocurrencies are not natural invention but was intentionally invented to use for predefined purposes. Because now scandal of US government money laundering via FTX and Ukraine military help is spinning up. And this has become possible because of cryptocurrencies “privacy” feature. (If you do not know about it – shortly speaking, it is suggested that US government military help sent to Ukraine partially was converted into crypto and returned back via FTX participation to finance Democratic party and its election expenses. Some analysts suggest that frauds were paid in crypto). Thus, fairytales  about crypto’s independence, privacy and “island of freedom” could really become just a myth.

On weekly chart our major downside target, the Objective Point (OP), stands at 12’235$. This is all time AB-CD pattern. It mostly agrees with the support line of  13K area, shown on the monthly chart. 

Second important pattern is downside butterfly. It’s 1.618 target perfectly agrees with our OP. Besides, now market stands in tight consolidation after reaching of 1.27 extension. Market shows very low volatility in recent three weeks, which usually suggests acceleration in near term. Finally, DRPO “Buy” pattern, mentioned in our daily video updates has failed, which is also bearish sign.  That’s being said – our technical view shows no reasons to suggest upside reversal by far and no acceptable context for long term BTC investing


Mostly, guys, we’ve said everything above. The major headwind for the cryptocurrencies not the investors’ expectations of 13K and even not the problem fo FTX bankruptcy that should sound for a few months more probably, but two other things. First is – total lose of confidence to cryptocurrency market among investors, as individual as institutional, but first of all among the latter. 

Second is – Fed interest rate policy. If we even suggest that we wouldn’t have any FTX problems overall background is not friendly for crypto market.  FPA suggests that market wrongly treat recent Fed statement as dovish. All talkings about inflation defeat and policy normalization have no background by far. Our position suggests that Fed has come to some threshold and further rate hike could push US economy into recession, like in 1930s. At the same time they understand that rate has to be significantly higher, somewhere near 6%. But, as recent rate change makes no solid impact on inflation anyway, they have decided to make a pause and slow down the rate change tempo. We suggest 0.5% rate change in December and 0.25% change in February. 

That’s being said, we do not deny room for som upside action on BTC. It could happen from time to time. But it will be tactical, short term performance, making no drastic impact on major downside tendency. The key to trend shifting is fundamental background, but hardly it will change in near term.  So we call to not buy BTC by far. 


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Sive Morten

Sive Morten

By day Sive Morten works for the large European bank. In that roll he evaluates the markets including currencies market managing bank risks and evaluating the bank portfolio.

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