Investor confidence in the industry is in jeopardy following the sad events involving FTX. Since rectification will take time, the crypto winter will likely continue for a few more months, possibly into 2023.
The lengthy winter only grows longer
The determination of long-term bitcoin (BTC) holders to continue accumulating their coin holdings has waned due to worries that the collapse of cryptocurrency exchange FTX will lengthen the winter. The Sam Bankman-Fried-founded exchange, formerly the third-largest in the world, filed for bankruptcy last week.
The investors were unfazed in the third quarter even as macroeconomic traders fled the market, rendering bitcoin impervious to the macroeconomy-induced volatility in traditional assets, making the shift in stance remarkable. They have switched from acquisition to spread, which may indicate that they are worried about the market’s resilience in the wake of FTX’s demise.
Even long-term holders are panicking
Regarding the decrease in the supply held by long-term investors and the transfer of idle coins, analytics company Glassnode stated in a weekly report released on Monday that “there has undoubtedly been a level of instant concern within the HODLer cohort.”
According to data released by Glassnode, the total quantity of circulating supply owned by long-term shareholders has decreased by 61,500 BTC ($1.03 billion) since Nov. 6, deviating from the increase seen between the end of June and early November.
48,000 BTC were spent over the week that concluded on Sunday, according to another indicator called long-term holder net position change. The supply that is mathematically least likely to be used is what Glassnode refers to as long-term holder supply.
Additionally, around 97,000 BTC that had been dormant or inert for more than a year migrated last week and might have rejoined the cryptocurrency’s current circulation.
Demonetization might be a potential plight in the cryptosphere
The collapse of FTX will have several effects, including the “possible political demonization of the crypto industry and a daisy chain of balance sheet capital shortfalls for multiple institutions,” according to digital assets analytics company Amberdata. Some chart pattern specialists predict that bitcoin will soon plummet to $13,000.
Long-term holders are making the first coin distribution since the end of June. It still needs to be early enough to declare a long-lasting bearish shift in attitude, even though long-term holders have started dispersing coins.
As per credible sources, who used the acronym LTH to refer to long-term holders, “a prolonged push upward in older coins being spent, and a reduction in LTH supply would be huge warning indications that a more general loss of confidence and worry may be in play.”
Regardless of FTX’s collapse, the market would always be challenging
Since traditional risk assets still had to consider the strong chance of a US recession in 1H23, the industry would be difficult anyway. Additionally, the US’s doubling down on policies has worsened global inflation.
Holding long holdings in cryptocurrency or other long-term risk assets has become challenging due to the strengthening USD. The US stock markets may have received a boost from the USD breaking that trend following the inflation report in October, but we don’t think this will likely continue until early 2023.