Until the beginning of this week, Bitcoin (BTC) had been demonstrating 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 that brighter days were ahead.
Fast forward to the present, and the spike in volatility 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 put an end to withdrawalsciting the inability to “operate as usual” so it is “pausing customer withdrawals as permitted by our Terms” suggesting the company is also kaput.
The contagion is spreading, and the shrapnel from this Krakatoa-level event is sure to spread throughout the entire crypto ecosystem.
Right now, it’s hard to make an asset-safe short-term investment thesis just by looking at the chart, and the best that insecure investors can do is stick to a proven plan or do nothing.
The most likely short-term outcome is that volatility will remain high and cryptocurrency prices will continue to rise for a while.
No one is comfortable focusing on the possible negative outcomes that lie ahead for the crypto sector and crypto prices, but it is the responsibility of every investor to consider the worst case scenario and have a contingency plan.
That way you don’t freak out when the shit actually hits the fan.
Here are some things to watch out for in the days ahead.
USDT/USD vs. USDC/USD
During high volatility events, stablecoins sometimes break their peg to the dollar. If there is any FUD wild about the Bitcoin ban, hack or death, stablecoin prices sometimes spike above $1.00 as traders seek refuge in dollar pegged assets.
On Nov. 9, USDT/USD broke below its peg to the dollar, falling as low as $0.97 at one point, according to data from TradingView and Coinbase. While USDT fell below its parity, USD Coin (USDC) the value skyrocketed to $1.01.
While we will not be exploring the unconfirmed reasons why there was dislocation between the two, unsubstantiated rumors related to Tether and Alameda Research can be easily found on Twitter.
What is important to note here is that panic can easily be triggered by false information, rumors and lies, so it does not matter if the Alameda/Tether rumors are completely false.
If it spreads on social media and scares investors, they’re going to act, and in this case; many will switch or are in the process of switching their USDT to USDC, BTC or other stablecoins.
Similar behavior was observed during the implosion of Terra and Celsius. On May 12, the USDC price rose from $1.00 to $1.06–$1.19, according to data from TradingView and KuCoin. On the same day, the value of USDT fell briefly to $0.98 and $0.94.
When the price drifts and there are spreads between exchanges, making stablecoin conversions becomes expensive and the experience of exchanging from one currency 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 pushed BTC price out of the 146-day range, where the price fluctuated between $24,500 and $18,600.
This is a significant range breakoutand from a technical analysis point of view, failure to recapture this range and further selling could see price slide through the volume profile gap to find support in the $11,000-$12,000 range.
Unpleasant, yes, but that is 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 into the ether (ETH) reflects a similar setup where ETH fell from a 148-day range between $2,000 and $1,250, but the price has already retraced the previous range.
Bearish traders have a downside target in the $700 range, but it is interesting to see how the price has rallied to trade around $1,250 again.
The market seeks a firmer footing
Many crypto-focused companies and investment groups are exposed to the FTX and Alameda research, which also means that these same companies now have some holes in their own balance sheets.
Companies with exposure to #FTX
-Sequoia Capital: $213.5 million exposure
-Galaxy Digital – $77 million exposure
-Crypto.com – Less than $10 million
-Amber Group – 10% funds
-Kraken – exposure to 9000 FTT
-Multicoin Capital – 10% funds
-Selini Capital – 3% of its funds
— Being Satoshi (@BeingSatoshi) November 10, 2022
A handful of these crypto-native companies also own large exchanges of a variety of altcoins and decentralized finance (DeFi) tokens. To salvage current losses, enforce their own loans, and meet their client obligations, it’s possible that several of these stashes of BTC, altcoin, and DeFi tokens could find a way to sell themselves to the market on spot exchanges.
Altcoins are already down a lot, and some are relatively illiquid, which means that a sharp increase in selling could put strong downward pressure on the price.
Before buying what looks 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 worth of FTX implosion hasn’t yet imploded. 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 Sub-Stack and resident newsletter author at Cointelegraph. Every Friday, Big Smokey will write market insights, trend how-tos, analysis, and advance research on potential emerging trends within the crypto market.
The views and opinions expressed herein 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.