FTX Is the Straw That Broke Bitcoin’s Back: The World’s Premier Cryptocurrency Is Now Likely To Fall to the $13,000 Price Level

Rohail Saleem
Bitcoin

This is not investment advice. The author has no position in any of the stocks mentioned. Wccftech.com has a disclosure and ethics policy.

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.

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The Bottom Is Near: Bitcoin Miners Officially Enter Capitulation Window for the Second Time in 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.

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.

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.

Source: https://coinmarketcap.com/currencies/ftx-token/

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.

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.

Source: https://coinmarketcap.com/currencies/bitcoin/

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

Source: https://www.lookintobitcoin.com/charts/puell-multiple/

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.

Moreover, total liquidations in Bitcoin just reached the highest level since the early summer crypto carnage.

Additionally, Bitcoin’s unrealized profits and losses have also entered the capitulatory territory.

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.

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