Up until the start of this week, Bitcoin (BTC) had shown record low volatility, and this gave altcoins enough leeway to paint some nice technical setups.
At the same time, on-chain data and technical analysis were beginning to suggest that BTC was halfway to bottoming out, with many analysts believing brighter days were ahead.
Fast-forward to the present, and the volatility spike the market received actually turned out to be a black swan event.
As you already know, FTX is kaput.
Alameda Research is kaput.
BlockFi has stopped withdrawals, citing an inability to “business as usual” so it is “pausing customer withdrawals as permitted by our Terms,” suggesting the company is kaput as well.
The contagion is spreading, and the shrapnel from this Krakatoa-level event is sure to spread throughout the crypto ecosystem.
Right now, it’s hard to make a safe short-term investment thesis for assets just by looking at the chart, and the best thing for insecure investors to do is stick to a proven plan or do nothing.
The most likely short-term outcome is that volatility will remain high and crypto prices will continue to rise for a while.
No one feels comfortable focusing on the possible negative outcomes ahead for the cryptocurrency sector and cryptocurrency prices, but it is the responsibility of every investor to consider the worst outcomes and have a contingency plan.
That way you don’t get scared when things get ugly.
Here are some things to keep in mind in the coming days.
USDT/USD vs. USDC/USD
During high volatility events, stablecoins sometimes break their parity with the dollar. If there is any wild FUD over Bitcoin being banned, hacked, or killed, stablecoin prices sometimes rise above $1.00 as traders seek refuge in fixed assets in the dollar.
During crypto black swan events, sometimes Tether (USDT) loses its peg to the dollar. It’s happened several times in the past and usually once the smoke clears it’s back to 1:1.
On Nov. 9, USDT/USD broke below its dollar parity, falling as low as $0.97 at one point, according to data from TradingView and Coinbase. While USDT fell below its parity, the value of USD Coin (USDC) soared to $1.01.
While we will not explore the unconfirmed reasons for the dislocation between the two, unsubstantiated rumors related to Tether and Alameda Research can be easily found on Twitter.
The important thing to note here is that panic can easily be triggered by misinformation, rumors and lies, so it doesn’t matter if the Alameda/Tether rumors are completely false.
If it spreads on social networks and scares investors, they are going to act and, in this case; many will exchange or are in the process of exchanging their USDT to USDC, BTC, or other stablecoins.
A similar behavior was observed during the implosion of Terra and Celsius. On May 12, the price of USDC rose from $1.00 to $1.06-$1.19, according to data from TradingView and KuCoin. On the same day, the value of USDT briefly fell to $0.98 and $0.94.
When price is dislocated and there are spreads between exchanges, doing stablecoin conversions becomes costly and the experience of switching from one coin to another or from an altcoin to a stablecoin can become unpleasant.
The USDT and USDC dollar parity is something worth keeping an eye on.
Bitcoin Price Expectations
The November 8 sell-off finally took the BTC price out of the 146-day range where the price fluctuated between $24,500 and $18,600.
This is a significant range breakout and from a technical analysis point of view, if this range is not reclaimed and selling increases, price could break through the volume profile gap to find support in the $11,000 to $11,000 range. $12,000.
Unpleasant, yes, but that’s just the current reality.
If Bitcoin can reclaim and hold the $18,000 level, at least the price will return to its previous range, and that would be a good sign.
A look at the Ether (ETH) chart reflects a similar setup where ETH fell from a 148-day range between $2,000 and $1,250, but the price has already regained the previous range.
The bearish traders have a downside target in the $700 range, but it is interesting to see how the price has recovered to trade around $1,250 again.
The market seeks a firmer base
Many crypto-focused companies and investment groups are exposed to the FTX and Alameda investigation, which also means that these same companies now have some holes in their own balance sheets.
Companies with exposure to #FTX
-Sequoia Capital – USD 213.5 million exposure
-Galaxy Digital – USD 77 million exposure
-Crypto.com – Less than USD 10 million
-Amber Group – 10% funds
-Kraken – exposure to 9000 FTT
-Multicoin Capital – 10% funds
-Selini Capital – 3% of their funds— Being Satoshi (@BeingSatoshi) November 10, 2022
Companies with exposure to FTX
-Sequoia Capital – $213.5 million exposure
-Galaxy Digital – $77 million exposure
-Crypto.com – Less than 10 million USD
-Amber Group – 10% of funds
-Kraken – exposure to 9000 FTT
-Multicoin Capital – 10% of funds
-Selini Capital – 3% of your funds
A handful of these crypto-native companies also own large bourses of a variety of altcoins and decentralized finance (DeFi) tokens. In order to salvage current losses, enforce their own loans, and meet their client obligations, it is possible that several of these stashes of BTC, altcoin, and DeFi tokens may find a way to be sold on the market on spot exchanges.
Altcoins are already down a lot, with some being relatively illiquid, meaning a sharp spike in selling could put strong downward pressure on the price.
Before buying what seem like dips and once-in-a-lifetime cycle funds, investors should do their research and take a closer look at who some of the majority holders of the token/project are and remember that the multi-billion dollar value of FTX has yet to implode. fully felt throughout the sector.
Now is the time to do your research and due diligence before making any investment in any cryptocurrency.
This newsletter was written by Big Smokey, the author of The Humble Pontificator Substack and resident author of the newsletter at Cointelegraph. Every Friday, Big Smokey will write market insights, trend instructions, analysis, and early research on potential emerging trends within the crypto market.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should do your own research when making a decision.