The crypto sector suffered a severe blow at the wrong time as a result of the FTX fiasco. However, Bitcoin is not endangered in the long term.
The demise of what used to be the fourth-largest Bitcoin exchange, FTX, came as a shock. Founder Sam Bankman-Fried's dishonest -- and arguably illegal -- business practice of lending client funds to sister company Alameda Research has torn the trust base of the entire industry.
The damage left behind by the alleged gang of fraudsters FTX is enormous. He will shape the image of the industry for years to come. However, if you take a sober look at the very direct effects of the fiasco, you can say: Bitcoin got off with a black eye again.
The course fell by more than 24 percent in the wake of the scandal. The digital gold found its temporary bottom at 15,792 US dollars. Since then, BTC has been oscillating in the narrow range between USD 16,000 and USD 18,000.
Source: Glassnode.
- Diagnosis: Oversold
In fact, Bitcoin is the most oversold it has ever been in its 13-year history. This can be derived from the MVRV indicator, for example. What is meant is the ratio of the market price to the so-called realized price, which analyzes the value of all coins at the time of their purchase. In June of this year, the value dipped below 1 for the first time. This means that the majority of people invested in BTC are below water. With brief interruptions, the MVRV has also remained below 1 since then. In other words, bitcoiners really had enough time to dump their coins; the weak hands have long since turned their backs on the market.
The MVRV has been below 1 for some time. The majority of BTC investors are therefore in loss territory. Source: Glassnode.
- Expect more contagion effects?
Nevertheless, without a strong positive stimulus from outside, there is no reason to expect rising prices. It is more questionable whether there can be further downturns due to contagion effects. Genesis, for example, reported losing around USD 175 million through FTX and had to discontinue its earn program as a result. This is piquant insofar as its parent company, the Digital Currency Group (DGC), also owns the Grayscale Bitcoin Trust. Grayscale distances himself from Genesis. However, the small chance of bankruptcy of the largest institutional Bitcoin fund in the world does not exactly cause euphoria on the market.
If there is anything positive to take away from the FTX disaster, it is that more and more people seem to be holding their coins themselves. Because the hubris about the whole mess is as follows: Bitcoin was actually started as an alternative to the corrupt financial system. Orange Coin is a construct that does not require so-called trusted third parties. However, anyone who entrusts their BTC to one of these risks – as in the case of FTX – everything.
With a rapid increase in wallet addresses holding 10,000 BTC or more, it's fair to say that at least the bitcoin whales have understood self-custody.
Bitcoin whales are withdrawing coins from exchanges. Source: Glassnode.