Bitcoin: How Low Will It Go?
Summary
- Bitcoin has broken its June low.
- This comes amid liquidity concerns in FTX, a large crypto exchange.
- Despite the unpredictable nature of this event, technical analysis has been pointing us down for quite some time.
- Ultimately, I believe Bitcoin should test the Delta Price, which sits around $13,600.
- This idea was discussed in more depth with members of my private investing community, Technically Crypto. Learn More »
KanawatTH/iStock via Getty Images
Thesis Summary
Bitcoin (BTC-USD) has just sold off, going as far as breaking below the June low. This can be attributed partly to the recent debacle between FTX (FTT-USD), Alameda and Binance (BNB-USD).
However, this can also be explained by technical analysis, and I was personally expecting a sell-off like this.
Another Liquidation Event
The recent sell-off has coincided with increased concerns that FTX could become insolvent, which became an issue when Binance CEO Zhao announced that Binance would be liquidating its position in FTT, the native FTX token. Binance holds a large amount of FTT because it used to have an equity stake in FTX. When the two parted ways, a large part of the payment it received was in FTT.
This announcement led to millions in outflows of the FTX exchange and also a sharp sell-off in FTT. To make matters worse, it was also revealed by CoinDesk that Alameda Research, a trading company owned by the FTX CEO, Sam Bankman-Fried, held most of its assets in FTT tokens. This puts Alameda, a company with $14.6 billion in assets, in a precarious situation, meaning it is also at risk of liquidation.
Finally, though, it seems that as the CEO of FTX put it himself, “things have come full circle” as Binance, one of the first investors in FTX, has made an offer to acquire the exchange. While this announcement gave Bitcoin some support, the cryptocurrency continues to sell off with the broader crypto market.
BTC, BNB and FTT (TradingView)
The chart above shows the recent moves in Bitcoin, FTT and Binance Coin. We can see that all these coins spiked early in the day, which coincided with the takeover announcement. Binance Coin reacted particularly well, rallying over 20%. However, the sell-off has now continued, with Bitcoin breaking its June low and FTT losing over 80% of its value. This, on a day when stocks are actually up on the day.
The Bitcoin Chart
This recent liquidity crunch could have been predicted, at least once Zhao made it clear he was liquidating his FTT. However, few could have predicted that this would have such a large impact on the crypto market.
But for those that have been following my work, you know I have been expecting Bitcoin to sell off even further, and I believe we would have got there with or without a catalyst like this one.
The two main drivers of my analysis are Elliott Wave Theory and a study of previous bitcoin cycles:
Bitcoin EWT analysis (Author's work)
Above, you can see my current EW analysis on Bitcoin, which I usually only share with subscribers. Since the November high in Bitcoin, we have been developing a five wave structure to complete what I see as a C wave in a large-degree wave 4.
The June low was the bottom of wave III, and though I had my doubts initially, this became clear as we saw Bitcoin bounce off this support in a very corrective manner. We rallied towards $24K in a wave V and then created a 1-2 setup to the downside, which is now filling out.
In fact, this recent sell-off would be a wave iii inside of 3, which makes a lot of sense, given its aggressive nature.
Where does Bitcoin bottom?
Calling an exact bottom is hard to do, but my guess is that we will at the very least, get near the region of the Delta Price, which I’ve talked about before. This on-chain metric is obtained by taking the realized price and subtracting the average price.
I won’t explain it in full again here. What’s important to know is that Bitcoin’s Delta Price has traditionally been briefly breached during the final capitulation events of previous bear markets and that the current Delta Price currently sits at around $13,600.
Takeaway
Trading Bitcoin is not for the faint of heart, but with the right approach, it can be done successfully. First off, like with any investment, one needs to understand its fundamentals and why Bitcoin is here to stay, something I did in my last article, Why Bitcoin is Better Than Gold. Secondly, understanding Bitcoin's history can help us understand where the important resistance and support levels are.
This is just one of many exciting cryptocurrencies you can buy right now!
Join Technically Crypto to stay ahead of the latest news and trends in the crypto space. Learn the ins and outs of blockchain technology and how you can profit from it.
Here's what you will get with your subscription:
- Access to our Crypto Portfolio.
- On-chain analysis of Bitcoin and Ethereum.
- Deep dive reports on Altcoins.
- Technical Analysis of major cryptocurrencies.
- News updates.
Crypto is changing the future, don't just watch it, be a part of it!
This article was written by
The Value Trend is now The Digital Trend.
We believe the greatest opportunities of the next decade will be in innovative technologies and cryptocurrencies, so this is where we focus our analysis.
We felt a brand update would help our readers better understand our work.
The world is turning digital and so should your portfolio!
Disclosure: I/we have a beneficial long position in the shares of BTC-USD either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.