Safe Haven

Small Bitcoin investors stop whales from crashing BTC price below $18K

Bitcoin price has avoided a bigger plunge below $18,000 in recent months, raising expectations that a market bottom is forming.

An army of small Bitcoin (BTC) investors has been fighting with their larger counterparts for months to keep the price above $18,000.

Bitcoin accumulation strong among fishes

Notably, there has been some on-chain divergence between so-called whales (entities that hold more than 1,000 BTC) and fishes (entities that hold relatively smaller amounts of BTC) as Bitcoin continues to fluctuate inside the $18,000-$20,000 area.

Bitcoin fishes have been accumulating BTC during the coin’s sideways trend. For instance, the net Bitcoin supply held by addresses with 100-1,000 BTC balance has increased from 3.71 million in June to 3.77 million in October, according to data provided by Glassnode.

*Bitcoin supply held by entities with 100-1K BTC balance. Source: Glassnode*

Similarly, the supply of Bitcoin held by addresses with a 10-100 BTC balance has also risen from 3 million to 3.15 million in the same period. The trend is similar across the entities holding anything between 0.001 and 10 BTC.

Meanwhile, the same period of Bitcoin’s sideways price action coincided with a decline in BTC supply held by whales. For instance, the Bitcoin supply held by the 1,000-10,000 BTC cohort has dropped from 3.82 million to 3.69 million since June.

*Bitcoin supply held by entities with balance 1K-10K BTC. Source: Glassnode*

Additionally, the 10,000-100,000 BTC cohort has decreased its Bitcoin holdings from 1.98 million to 1.92 million in the same timeframe.

A basic interpretation of the on-chain data mentioned above is that fishes are more confident than whales about a potential Bitcoin price bottom near $18,000.

But while these small investors may have been absorbing massive selling pressure created by larger investors, the downside risk is historically greater with a decreasing whale population, as shown below.

*Number of Bitcoin whales vs. BTC price. Source: Glassnode*

Interestingly, one of the few exceptions is when Bitcoin reached its all-time high price of $69,000 while the number of whales remained relatively flat. This may suggest that whales are having less influence on the market compared to previous years, particularly as the balance on exchanges continues to hit multi-year lows.

BTC correlation with gold rises

Fishes continue accumulating amid reports that investors are viewing Bitcoin as a safe haven asset all over again.

For instance, Alkesh Shah and Andrew Moss, digital strategists at Bank of America, cited Bitcoin’s weakening correlation with United States stock indexes and strengthening correspondence to gold’s price moves as a sign that the cryptocurrency is looking to live up to its “digital gold” narrative in the future.

Notably, Bitcoin’s 40-day correlation with riskier markets, such as Nasdaq Composite and S&P 500, has been flattening near 0.69 and 0.75, respectively, which are below their record levels from a month ago. On the other hand, its correlation with gold has surged from zero in August to 0.67 in October.

*BTC/USD and XAU/USD 40-day correlation coefficient. Source: TradingView*

“A decelerating positive correlation with SPX/QQQ and a rapidly rising correlation with XAU indicate that investors may view Bitcoin as a relative safe haven as macro uncertainty continues and a market bottom remains to be seen,” they wrote.

Others, however, expect Bitcoin’s price will eventually break down below the $18,000-support level. They include independent market analyst Filbfilb, who argues that the BTC price could drop as low as $10,000, given the tight correlation with risk assets and macroeconomic headwinds.

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 conduct your own research when making a decision.

The biggest Bitcoin fund just hit a record -35% discount — A warning for BTC price?

Institutional interest in Grayscale Bitcoin Trust continues to dwindle 10 months into the crypto bear market.

Grayscale Bitcoin Trust (GBTC), a cryptocurrency fund that currently holds 3.12% of the total Bitcoin (BTC) supply, or over 640,000 BTC, is trading at a record discount compared to the value of its underlying assets.

Institutional interest in Grayscale dries up

On Sept. 23, the $12.55 billion closed-end trust was trading at a 35.18% discount, according to the latest data.

*GBTC discount versus spot BTC/USD price. Source: YCharts*

To investors, GBTC has long served as a great alternative to gain exposure in the Bitcoin market despite its 2% annual management fee. This is primarily because GBTC is easier to hold for institutional investors because it can be managed via a brokerage account.

For most of its existence, GBTC traded at a hefty premium to spot Bitcoin prices. But it started trading at a discount after the debut of the first North American Bitcoin exchange-traded fund (ETF) in Canada in February 2021.

Unlike an ETF, Grayscale Bitcoin Trust does not have a redemption mechanism. In other words, GBTC shares cannot be destroyed or created based on fluctuating demand, which explains its heavily discounted prices compared to spot Bitcoin.

Grayscale’s efforts to convert its trust into an ETF failed after the U.S. Securities and Exchange Commission’s (SEC) rejection in June. In theory, the SEC’s approval could have reset GBTC’s discount from current levels to zero, churning out profits for those who purchased the shares at cheaper rates.

Grayscale sued the SEC over the rejection of its ETF application. Realistically, however, it could take years for the court to give a verdict, meaning investors would remain stuck with their discounted GBTC shares, whose value has fallen by more than 80% from their November 2021 peak of around $55.

*GBTC daily price chart. Source: TradingView*

Also, GBTC’s 12-month adjusted Sharpe ratio has dropped to -0.78, which shows that the anticipated return from the share is relatively low compared to its significantly high volatility.

*GBTC 12-month adjusted Sharpe Ratio. Source: PortfolioSlab.com*

Simply put, institutional interest in Grayscale Bitcoin Trust is drying up.

A warning for spot Bitcoin price?

Grayscale is the world’s largest passive Bitcoin investment vehicle by assets under management, but it doesn’t necessarily enjoy a strong influence on the spot BTC market after the emergence of rival ETF vehicles.

For instance, crypto investment funds have attracted a combined total of almost $414 million in 2022, according to CoinShares’ weekly report. In contrast, Grayscale has witnessed outflows of $37 million, which include its Bitcoin, Ether and other tokens’ trusts.

*Fund flows by provider. Source: CoinShares*

Instead, day-to-day fluctuations in the spot Bitcoin price are heavily driven by macro factors, at least for the time being.

*NDAQ versus BTC/USD daily price chart. Source: TradingView*

A stronger U.S. dollar also hurts Bitcoin’s upside prospects, given their consistent negative correlation over the past year in a higher interest rate environment.

For instance, the U.S. dollar index (DXY), which measures the greenback’s strength against a basket of top foreign currencies, has climbed over 113, its 20-year high, on Sept. 23. Similarly, yields on two-year and 10-year U.S. Treasury notes have climbed to 4.21% and 3.69%, respectively.

*U.S. dollar index versus US 10-year and US two-year Treasury yields. Source: TradingView*

Several on-chain metrics, however, are suggesting that Bitcoin could bottom out soon based on historical data. However, from a technical standpoint, BTC’s price still risks a drop toward the $14,000-$16,000 area, according to pseudonymous independent analyst “il Capo of Crypto.”

*BTC/USD eight-hour price chart. Source: TradingView/Capo of Crypto*

“It’s more likely that [Bitcoin] will reject at the first resistance of 20300-20600,” he tweeted while citing the chart above, adding:

“Wait for the bounce, then exit all the markets.”

Other Bitcoin analysts have thrown around even lower targets such as $10,000–$11,000, due to this being a historical high-volume range.

Bitcoin ‘nuke’ warning as Fed rate hike decision looms — Dollar index hits 20-year high

Polls suggest that the Fed is likely to raise rates by 75 basis points as Bitcoin price clings to $19,000.

Bitcoin (BTC) underwent a weak rebound on Sept. 21, and the U.S. dollar jumped to a new yearly high as investors await Sept. 21’s Federal Open Market Committee’s interest rate decision.

BTC price holds $19K ahead of Fed decision

BTC’s price has managed to cling on to $19,000 with a modest daily gain of 1.33% . Meanwhile, the U.S. dollar index (DXY), which measures the greenback’s strength versus a pool of top foreign currencies, rose to 110.86, the highest level in 20 years.

*BTC/USD vs. DXY daily price chart. Source: TradingView*

FOMC rate hike scenarios

The Federal Reserve is poised to discuss how far it could raise its benchmark lending rates to curb record inflation. Interestingly, the market expects the U.S. central bank to hike rates by 75 or 100 basis points (bps).

The ramification of higher interest rates will likely result in a lower appetite for riskier assets like stocks and cryptocurrencies. Conversely, the U.S. dollar will serve as the go-to safe haven for investors escaping risk-on assets.

“There seems no reason for the Fed to soften the hawkishness shown at the recent Jackson Hole symposium, and a [0.75 percentage point] ‘hawkish hike’ should keep the dollar near its highs of the year,” analysts at ING told the Financial Times.

Independent market analyst PostyXBT argues that a 100 bps rate can “nuke” Bitcoin below its current technical support of $18,800. He also suggests that BTC has a good chance of recovery if the rate hike turns out to be lower than expected, or 50 bps.

$BTC 1D

As us FOMC experts would know, today is a big day!

100bps likely nukes support for good?
50bps likely pumps and gives bulls some breathing room?

Going to be a very interesting daily close https://t.co/C5ClM436N6 pic.twitter.com/mJP7qpGEv1

— Posty (@PostyXBT) September 21, 2022

These speculations echo general rate hike expectations. John Kicklighter, the chief strategist at DailyFX, notes that a 50 bps rate hike would be bullish for the U.S. benchmark stock market index.

Nonetheless, a 100 bps rate hike would be extremely bearish for the S&P 500. This could be equally problematic for Bitcoin, whose correlation with stocks has been consistently positive since December 2021.

*FOMC policy decision scenarios for DXY and SPX. Source: John Kicklighter/DailyFX*

Polls expect a 75 bps rate hike

The U.S. economy suffered two back-to-back quarters of negative growth. Moreover, its manufacturing PMI pointed to the slowest growth in factory activity since July 2020. Meanwhile, the two-year U.S.Treasury returns have crossed above the 10-year U.S. Treasury returns, plotting a yield curve.

These metrics raise the alarm about an impending recession. But offsetting those are unemployment data at its record low and housing starter rates still above their danger zone of $1.35 million, according to data presented by Charles Edwards, founder of Capriole Investments.

*Total new privately-owned housing units started. Source: FRED*

Normally, recession warnings prompt the Fed to pivot. In other words, to scale back or pause hiking rates. But Edwards notes that the central bank will not pivot since the U.S. economy is technically not in recession.

“Until major concerns of recession show up, until it hurts where it counts — employment — there is no reason to expect an urgent change in Fed policy here,” he wrote, adding:

“So it is business as usual until we have evidence that inflation is under control.”

Most economists, or 44 of the 72 polled by Reuters, also predict that Fed would raise rates by 75 bps in their September meeting. Therefore, Bitcoin could avoid a deeper correction if it maintains its correlation with the S&P 500, based on Kicklighter’s outlook.

Bitcoin to $14K next?

From a technical perspective, Bitcoin could drop to $14,000 in 2022 if a drop below its current support level of around $18,800 triggers a “head-and-shoulders” breakdown.

*BTC/USD daily price chart featuring head-and-shoulder breakdown setup. Source: TradingView*

Conversely, a rebound from the $18,800-support could have BTC’s price eye $22,500 as its interim upside target, or a 16.5% rise from Sept. 21’s price

Portuguese banks shutting crypto accounts citing risk management concerns

The Bank of Portugal has licensed all of the exchanges that have had their accounts closed, including Criptoloja, Mind The Coin and Luso Digital Assets.

Several large banks in Portugal have reportedly begun closing the accounts of cryptocurrency exchanges due to “risk management” concerns, suggesting a shift in Portugal’s pro-crypto position. The country’s central bank appears to have given the financial institutions the green light to take action.

Several of Portugal’s top banks recently closed the accounts of CriptoLoja, the country’s first cryptocurrency exchange to obtain a license to operate. According to a Bloomberg report, at least four domestic cryptocurrency exchanges have seen their accounts shut by BCP (Banco Comercial Portugues), Santander Bank, Caixa Geral de Depósitos, BiG and Abanca.

All the exchanges are licensed by the Bank of Portugal, which regulates domestic cryptocurrency trading platforms. Three of the exchanges were identified as Criptoloja, Mind The Coin and Luso Digital Assets, with a third requesting that their name not be published by media platforms. The head of the Bank of Portugal, Mário Centeno, was quoted as saying that banks had complete freedom to do anything they wanted, but he promised to keep a close eye on the situation.

The Bank of Portugal’s oversight of exchanges includes ensuring that platforms combat money laundering and the financing of terrorism, and work to prevent fraud. BCP told Bloomberg that its primary duty was to inform competent authorities if it detects “suspicious transactions,” which may lead to the termination of banking relationships with certain companies.

Cointelegraph reached out to CryptoLoja, one of the affected crypto exchanges, for comment but did not receive a response as of press time. This article will be updated when a response is received.

The closure of these accounts is seen as a blow to Portugal’s crypto-friendly approach, as authorities had previously rejected two tax proposals that might have been applied to investors making money from cryptocurrencies. However, the government and financial sector have recently shown an increased interest in regulating cryptocurrency in line with other European Union nations.

Crypto exchanges have had trouble obtaining banking services worldwide due to their perceived risk. As reported by Cointelegraph, United States Senator Elizabeth Warren is reportedly proposing a bill that would effectively ban bank-provided cryptocurrency services.

The Iberian nation has drawn Bitcoin entrepreneurs from around Europe, particularly Ukrainians fleeing the crisis in their home country. Around 27,000 Ukrainians lived in the Iberian nation before the military conflict with Russia, but their number has risen to over 52,000, making them the second-largest foreign population after Brazilians.