This is a market update. We’re going to look at bitcoin and also at the state of a bunch of entities that have had to sell out of their bitcoin because of what’s gone on in the crypto market over the last few weeks. Some of these crazy institutions that have been lending over and over again and have basically just been carried out FTX have come to the rescue here and I’ll talk about that in a bit without them rescuing some of these firms. I think bitcoin would be way lower than it is now.
So we may have seen a local bottom at least for the trading range, but I think there’s still a lot to come out in terms of who had exposure essentially to 3AC. 3AC is the hedge fund that has gone completely belly up, and a lot of people have exposure to this, so we’re seeing some of the ramifications of that right now.
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Bitcoin price chart
So let’s go over the bitcoin price for now. As you can see, we met support at around 20,000, and I think this may turn out to be quite a strong local support area if you look at the chart going back to 2020. The last time that we were around here, the price also chopped and traded around this level, and you can see it was actually resistance around here for quite a period of time now moving forward. Obviously, we’ve had all this time, all of this monetary stimulus, and then the unravelling of this. We’re also meeting support right here. I believe that the price would be way lower if FTX and Alameda hadn’t stepped in and basically bailed out some of these funds, but there could be way more coming as well. So, definitely something to watch out for. I’m going to have a look at the miners as well, who will keep a lid on the price for local support, though. I would like to see us potentially test this again and then bounce off of this again if we test this a couple of times and maybe come a bit higher. That’s a good sign that 20,000 is quite a solid number there. So I’m looking for 20,000 as a support level.
I’m not bullish on the price of bitcoin, at least for the next, you know, few months. A lot depends on the Macro, which I’ll get on to later. For now, this is a bear market both in the Macro, which is, you know, the worst it’s been in years and years, and with the deleveraging of crypto specifically as well, but we could start to see potentially some sort of button forming, but I believe that’s going to rely more on the Macro as well.
Miner shambles
So let’s get on to that. These are bit farms that have actually sold 3,000 bitcoin. We’ll go through this because this is quite hilarious. So they sold 3,000 bitcoin recently, which is obviously a big chunk of their bitcoin holdings, and if you heard why they’re doing, I said during a bear market, miners find it very difficult to run their business because during a bull market, equity is valued very highly and these big miners have access to the equity markets and public markets. And so they sell their equity at very lofty prices. Interest rates are usually lower in bull markets as well, so you can borrow money quite cheaply. That is not the case right now. You have these miners who have no other option other than to sell their bitcoin in the market to fund their own operations to fund the energy costs and to fund investment in new miners.
So we are selling a portion of our bitcoin holdings and daily production, so it’s really important that they are continuing to sell, and they’re selling their daily production of bitcoin right now, so please consider this. This is a bit of a farm. This is one of the bigger miners. There are going to be a ton of smaller miners, private entities, small guys, who absolutely have no access to capital whatsoever, and they will just be selling their bitcoin right now if they’re in the same sort of situation. They say that this is the best and least expensive method. Read on that they can’t sell equity now and borrowing rates have gone through the roof because you can’t borrow money now as a bitcoin miner. The bitcoin price is so low that no one’s going to lend you money because it’s almost unprofitable in terms of how much it costs to mine bitcoin versus the current price as well.
So it’s a really complex situation, but it boils down to this: miners will be selling for the foreseeable future, and so they will keep a lid on the price. What’s kind of funny about this, though, is that they are just selling 3,000 bitcoin now. If you look back towards the start of this year, in January, they actually bought a 1,000 bitcoins. This is embarrassing for them, obviously, because if we look at the price in January, we’re around 46,000. So they bought a 1,000 bitcoins at 46,000, near highs, and then they had to sell 3,000 at around 20. So, an absolute shambles of what’s going on with them essentially mismanaging their business they took out. If you actually look down here, they took out a loan from Galaxy Digital. Now Galaxy Digital, I believe, has exposure to 3AC as well as this whole lending debacle. So what you can see is a lot of the liquidity coming out of this market, and that sends shock waves everywhere, including to bitcoin miners, who now have no choice other than to sell their bitcoin.
So when we’re looking at the price, I’m bullish on bitcoin for the long term, but in the short term, there’s nothing telling me that the price is going to start making higher highs and maybe test this resistance at 25.
You know the Macros are bad, and look, these bitcoin miners have to be selling their bitcoin, and so that is what I’m looking at. This is just embarrassing to buy bitcoin at 46 and sell it at 20.
We can also see here, for the last year, this big inflow. This is a miner inflow into exchanges. Why would a miner send bitcoin to an exchange? The only reason is to sell it or potentially cover debts that they’ve had with other participants. So whenever you see these big spikes, you are potentially seeing some selling now. You can see big spikes here during the bull market. You know, clever miners sell out during good times. But if we’re seeing any more of these high spikes in a bear market, it’s obviously selling coming in and potentially four selling. So it’s definitely something to keep an eye
The bailouts!
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So if you have crypto on other platforms, they’ll give you a deposit bonus up to $4,000. Now to get onto FTX Alameda and how they’ve, essentially, potentially, saved the market here. I think the market would be 50% lower if they hadn’t stepped in and essentially lent money to a lot of struggling firms.
So I’ll show you this right now. This actually came out today. Voyager is one of the lending apps, and you know, these lending apps use some institutional entities like Galaxy Digital and some other lending and borrowing desks, so they obviously have lent money to 3ac as well. Why would they do this? Well, obviously, Voyager is in the middle right, and it’s not just Voyager; there are lots of other lending apps as well. There’s one in Hong Kong, I think, that’s really exposed to this. Yeah, essentially everyone gives them their crypto and then they take the value of that, and loan it out to people that need money now.
And that’s obviously going to earn them a yield, and that’s how they pay their yield. When you invest in these, these apps, there’s nothing wrong with that. This is what banks do all day long. The problem has been just the unregulated nature and, you know, just crazy decisions to lend money to institutions that I don’t know what the terms of the agreement were, you know. It was obviously uncollateralized. You know, they didn’t have collateral on the account, so this was essentially an uncollateralized loan. Otherwise, they would have had the bitcoin and crypto here to actually sell an account, but they didn’t. So you can see here, Voyager issued a notice of default to 3AC for failure to repay its loan. 3AC has borrowed, as you can see here, 15,250 bitcoin and $350 million USDC.
So essentially, Voyager is now on the hook for 15,000 bitcoin and $350 million that they potentially have to completely write off. They are completely bankrupt. You don’t know what they’ve lost because they were borrowing and then putting in other protocols and, obviously, things have come down 60%, 70%, 80%, on whatever they were invested in. So they can’t pay. So this is obviously bad news for voyagers,
But now this is also bad news for them. As you can see here, this is a Dirty Bubble, which has essentially shown us how much voyagers owe to their clients. So this is what their clients have put on their account with Voyager, which is, 25,000 bitcoin and $384 million. They lost. So that’s what they owe to their clients. That’s what their clients have put on vacation and expect to get back. As you can see, they’ve lost essentially all of the dollars and 70-75% of the bitcoin.
So that’s not there. Do you think, well, void, you’re going to go bust? Well, what happened was basically that Sam Frank, Sam Bankman, Friedan and Alameda lent voyager half a billion dollars to essentially stop them going under and going bankrupt, because of 3AC themselves, going under as well. This is just a clear bailout from SSB and Alameda. That is why I believe that if they hadn’t stepped in and lent money to Voyager and some others, we could potentially be way lower, but for right now, potentially, these firms have found a footing, but I think there’s probably more to come out here and there is probably some more unwinding. That’s going to happen over time. So, again, just kind of another bearish weight on the price.
Some potential good news, though, is that it seems like a lot of the worst of that selling is now over or coming towards an end. There are probably some extra miners that need to be sold. And there are probably some firms that need to rearrange their risk profiles and everything like that, but we would hope that the absolute worst of that real dump and selling is over, and there may be some shock wave. But at least we can move forward from that and potentially find a bottom here for the price.
Something else I want to look at is oil, which I think is really important at the moment. The price had just come down to this level of around $116, and it’s now absolutely crashed again down to about $108, down about 5%. This is really important because if oil keeps coming down, well, there are two things here. The first one is that if oil starts to crater and really fall off, that’s obviously telling us that the market expects quite a large recession coming this year over the next six months. That’s potentially fairly bad in the short term because corporate earnings are kind of going to come down if there is a recession. So earnings forecasts are all going to come down. That’s going to weigh on the stock market, which is going to weigh on bitcoin and crypto. However, in a general sense, oil coming down is good for inflation generally. So if this comes down and starts to consolidate at the $100 level or even below, that’s going to be long-term good for inflation, which means that monetary policy can ease off a little bit, and that’s going to ease everything, including the price of bitcoin and crypto. Now oil, for me, is still really just trending here, so we don’t know whether this is just going to kind of come and actually hit this support line and maybe bounce off a little bit. It seems unlikely. The probability is that it continues lower or consolidates, and there’s a ton of support here as well.
So if you see around this price, I think it’s around $100-105, so that would be obviously a support level down here around $100, but anything under anything around $100 definitely eases inflation a lot. So if this keeps coming down, it’s kind of short-term not great for the economy because it means that a recession is definitely here and so that’s going to be short-term bad, but this coming off is long-term better for markets and crypto in general. So keep an eye on oil because it will front run a lot of the economic activity that will come out later during results and earnings later in the year.
[This article is a transcription of a video made by MoneyZG]
Original video: https://youtu.be/pV9gUgxiCTY]
