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FTX Effect on Crypto Market, Bitcoin Needs $16.5K

Ethereum (ETH) increased by 4.04 percent, and Bitcoin (BTC) by 1.5%. Shiba Inu climbed 3.94%, and Dogecoin (DOGE)  by 5.39%. Treasury yields fall as meeting minutes indicate a slowing of tightening.

On Wednesday, Ethereum increased by 7% to reach $1,163.91. Dogecoin, meanwhile, increased by over 10% to $0.08176. However, the leading cryptocurrencies still had a ways to go to catch up on a weekly basis.

In addition to the negative effects of the “FTX drainer” the market for BTC was extremely erratic, with its price constantly setting new highs and lows. BTC is currently trading at the highest price of the day. 

The price it traded at within one day was as low as $15,599.05, and the volume it traded at decreased by 10.77% to $31.69B.

BTC/USD Weekly Chart

BTC/USD Weekly Chart

The fact that Rockstar Games prohibited NFTs and cryptocurrencies from Grand Theft Auto fan servers brought more bad news for supporters of Ethereum and Polygon. Dogecoin prices were 6% behind where they were the previous week.

The catastrophic collapse of FTX continues to have an impact on the cryptocurrency market, both directly and indirectly, through concerns about how regulators may handle the situation. 

The deputy governor of the Bank of England described unbacked exchange tokens like FTX’s FTT earlier this week as an “extraordinary danger.”

Why $16.5K is Important for Bitcoin

Between November 20 and 21, Bitcoin BTC, down $16,616, experienced a 7.3% decline as it attempted the $15,500 support. Even though the correction appears to be slight, the movement resulted in the liquidations of futures contracts worth $230 million. 

As a result, leveraged bulls were unprepared for the $1.14 billion monthly options expiry on November 25.

24HR BTC Trading

24HR BTC Trading

After Genesis Trading, a subsidiary of the Digital Currency Group (DCG) conglomerate, stopped paying out at its crypto lending division on November 16, the mood of bitcoin investors deteriorated. More significantly, DCG owns Grayscale, the fund manager behind the Grayscale Bitcoin Trust, the largest institutional Bitcoin investment vehicle (GBTC).

In addition, Bitcoin miner Core Scientific issued a “serious doubt” warning on the viability of its future operations over the following 12 months due to a lack of funding. 

The company recorded a net loss of $434.8 million for the third quarter of 2022 in its quarterly report submitted to the United States Securities and Exchange Commission (SEC) on Nov. 22.

Letitia James, the attorney general of New York, wrote a letter on November 22 to the members of Congress urging them to forbid the purchase of cryptocurrencies with money from IRAs and defined contribution plans like 401(k) and 457 plans.

The bulls’ greatest efforts have failed to result in a daily close of Bitcoin above $17,000 since November 11. This movement explains why, despite the 6% comeback from the $15,500 bottom, the $1.14 billion Bitcoin monthly options expiry on Nov. 25 could be advantageous to bears.

Most Bullish Bets Are Above $18,000

Bulls were taken aback by bitcoin’s sharp 27.4% retreat when it failed to overcome the $21,500 resistance on November 5 since only 17% of call (buy) options for the monthly expiry were positioned below $18,000. As a result, despite having placed fewer bets, bears are in a better position.

Given that the call (buy) open interest is $610 million versus the put (sell) open interest of $530 million, a broader view utilizing the 1.14 call-to-put ratio reveals stronger bullish bets. However, given that Bitcoin is down 20% in November, the majority of bullish wagers will probably be worthless.

For instance, only $53 million worth of this call (purchase) options will be available on Nov. 25 at 8:00 am UTC if Bitcoin’s price remains below $17,000. 

This discrepancy arises from the fact that the right to purchase Bitcoin above $17,000 is useless if it trades below that price at expiration.

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Bears Could Secure a $245 Million Profit

On Nov. 25, bitcoin bulls must raise the price above $18,000 in order to turn the tide and prevent a possible $245 million loss. However, Bitcoin supporters recently liquidated leveraged long futures positions totaling $230 million.

So they are less likely to drive the price higher in the near future. With that considered, the $15,000–$17,000 range on November 15 is the most likely scenario and offers a respectable win for bears.

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Treasury Rates Fall After Fed’s Minutes

Treasury rates fell somewhat on Wednesday as meeting minutes from the Federal Reserve’s recent meeting indicated a possible delay in tightening ahead. The benchmark 10-year Treasury yield was trading at roughly 3.696%, a 6 basis point decrease. 

The 2-year Treasury yield fell 3.4 basis points to 4.483%. Yields and prices move inversely, and one basis point equals 0.01%.

The minutes suggested that modest hikes may be forthcoming in the near future as the central bank examines the impact of previous rate decisions on the economy.

On Tuesday, Kansas City Fed President Esther George told a conference hosted by the Central Bank of Chile that interest rates may still have to rise as the Fed works to reduce inflation and restrain consumer demand.

George’s remarks followed the tone set by her colleagues earlier in the week, which suggested that interest rates would continue to climb, albeit at a slower pace. Traders are concerned that the pace of rate hikes may push the US economy into a recession.

Thursday is a Thanksgiving holiday, and markets will be closed.

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  • Phyllis Wangui

    Phyllis Wangui is a Financial Analyst and News Editor with qualifications in accounting and economics. She has over 20 years of banking and accounting experience, during which she has gained extensive knowledge of the forex, stock news, stock market, forex analysis, cryptos and foreign exchange industries. Phyllis is an avid commentator on these topics and loves to share her insights with others through financial publications and social media platforms.

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