Elon Musk Says Bitcoin 'Will Succeed' - 5 Things You Need to Know About Bitcoin This Week

Bitcoin started the new week on shaky ground after recording its lowest weekly close in two years.

Bitcoin is still grappling with the fallout following last week 's thunderstorm on cryptocurrency exchange FTX .

In an increasingly volatile market, investors are unsure of what's next as more companies issue warnings about solvency and regulators ramp up investigations into the crypto space.

The mood was one of panic, with even some of the industry's biggest names warning that last week's events had set the industry back a few years.

Meanwhile, it’s business as usual for Bitcoin. FTX is not the first such crash it has experienced, and the Bitcoin network internally remains as strong as ever.

As ordinary holders begin to deal with heavy losses and continued volatility, Cointelegraph provides an analysis of the factors that will influence BTC price action in the coming days.

Cryptocurrency to face new FTX onslaught

While nothing is certain in the current crypto market environment, what is certain is that FTX and its aftermath are the number one source of bitcoin price volatility.

The weekly chart says it all — the $5,500 drop in the seven days to Nov. 13 culminated in the lowest weekly close since mid-November 2020, according to data from Cointelegraph Markets Pro and TradingView.

BTC/USD weekly candle chart (Bitstamp) Source: TradingView

At the time of writing, BTC/USD is still around this level — having bounced back to $16,300 after dropping to $15,780 overnight on Bitstamp.

BTC/USD hourly candle chart (Bitstamp) Source: TradingView

As far as FTX is concerned, the story is far from over, with companies and related entities with exposure to the exchange finding themselves in a bind.

As such, commentators predict a possible repeat in the coming days and weeks as the knock-on effect puts more and more crypto companies out of business.

Exchanges in particular have come under scrutiny, with Crypto.com, Kucoin and others becoming suspect sources of liquidity issues.

Crypto.com and Gate.io saw a spike in withdrawals on the day, leading to warnings that the exchanges could be the latest to see a “bank run” as investors seek to control their funds.

Data from on-chain analytics firm CryptoQuant shows that 1,500 bitcoins left Gate.io on Nov. 13. On November 14, the outflow was close to 800, and it is still rising.

Bitcoin Outflow (Gate.io) Chart Source: CryptoQuant

More broadly, the data shows that exchanges’ bitcoin reserves are estimated at 2.09 million bitcoins, which CryptoQuant notes may not reflect the true picture due to volatility.

The last time reserves were this low was in early 2018.

Bitcoin exchange reserves chart Source: CryptoQuant

Bitcoin price rebounds from $15,700, Musk expresses confidence in Bitcoin

Predicting the price of Bitcoin is no easy task against a backdrop of ongoing uncertainty.

Turning to the exponential moving average convergence divergence (MACD), analyst Matthew Hyland warned that the BTC/USD 3-day chart is about to repeat the bearish setup, which has resulted in losses both times in 2022.

“Bitcoin’s 3-day MACD will break below a bearish threshold tomorrow for the first time since April,” he wrote .

BTC/USD Annotated Chart Source: Matthew Hyland/Twitter

Still, Hyland noted that it took almost a year for bitcoin to find a macro price bottom after the initial shock following the 2014 Mt. Gox hack.

“It’s been less than 11 days since FTX went down,” he added.

Meanwhile, analyst Il Capo of Crypto believes that the market is ready for an "final capitulation," which could come sooner.

In a series of tweets, he said it would come first in the form of a "bull trap," followed by a firm rejection that would push the market to new lows.

For altcoins, he said, the drop would be "40-50% on average."

Prominent trader Crypto Tony worries that even the lowest weekly close in two years may not serve as support in the shorter term.

"Nice breakout, but if we can't hold the $16,400 swing spot, then it's just a fake breakout and we'll wait for a test lower," he said, commenting on Bitcoin's rebound from an intraday low of $15,780.

Twitter CEO Elon Musk expressed tacit support.

“BTC will succeed, but may have a long winter,” he wrote in a Twitter debate that day.

Twitter debate (screenshot) Source: Twitter

Another short-term price catalyst is the choice of the largest exchange, Binance, to create a dedicated recovery fund to help protect businesses.

A quiet week on the macro front, stock market correlations in focus

What’s happening outside of the crypto space further underscores the extent to which FTX marks a “black swan” event for the industry.

While bitcoin and altcoins fell more than 25% in a matter of days, U.S. stocks recovered from losses earlier this month.

As a result, as noted by research firm Santiment, a stark divergence has emerged between Bitcoin and risk-on assets, helping to break down the correlation that has persisted over the past year.

“As the trading week wraps up, the story this week is a stark separation between cryptocurrencies (following the fall of FTX) and stocks,” the firm concluded in a tweet last week.

Bitcoin, ETH vs. Stocks, Gold Correlation Annotated Chart Source: Santiment/Twitter

Market commentator Holger Zschaepitz also pointed out that the gap between Bitcoin and Nasdaq's performance is widening: "Bitcoin's weekly performance gap, Nasdaq's rebound is the largest since 2020. The encryption world has shrunk to the equivalent of global stocks. 1%."

From a macro perspective, this decline in the correlation could be a beneficial moment, as a stronger dollar can itself come with some erratic swings.

The U.S. dollar index (DXY) attempted to break above 107 but failed ahead of the U.S. stock market open on Nov. 14, meaning risk assets should gain as a result.

However, if the U.S. dollar index returns to recent highs, things could soon look very different.

Still, the intraday lows in the U.S. dollar index were back at support levels not tested since mid-August.

US Dollar Index (DXY) 1-day candlestick source: TradingView

However, popular trading house Stockmoney Lizards, commenting on the long-term performance, said that the US dollar index broke the parabolic curve since 2021

“Correction will be good for Bitcoin,” some tweeted comments added .

Dollar Index (DXY) Annotated Chart Source: Stockmoney Lizards/Twitter

'Buy the dip' frenzy hits as miner sales slow

While many existing holders are trying to withdraw their bitcoins from exchanges or find ways to cover their losses, not all are reeling.

On-chain data shows that with BTC/USD hitting multi-year lows last week, investors big and small are taking the opportunity to “buy the dip.”

According to data from on-chain analytics firm Glassnode , the number of wallets containing between 1 and 10 bitcoins has increased significantly.

Chart of Bitcoin addresses holding 1-10 BTC Source: Glassnode

This trend also appears to be playing out among the largest group of Bitcoin holders, Bitcoin’s “whales.” Those entities with wallet balances of 10,000 BTC or more are also growing, now numbering close to 130, Glassnode data shows.

Crypto Rover, a well-known social media commentator , responded : "Whales are accumulating at an unprecedented rate."

Chart of Bitcoin addresses holding 10,000 BTC Source: Glassnode

Meanwhile, one group that is certainly not in accumulation mode right now is the miners. Bitcoin held by miners tracked by CryptoQuant remains on a downward trend after sharply reducing Bitcoin reserves last week.

From 1,858,271 BTC on November 8, the miner’s reserves totaled 1,853,606 BTC as of this writing on November 14.

Still, reserves are higher than early 2022, and recent sales represent a negligible portion of miners' total positions.

Bitcoin Miner Reserve Chart Source: CryptoQuant

Sentiment data offers glimmer of hope

Predictably, sentiment across the crypto market has taken a major hit thanks to FTX — but is it really that bad?

According to the Crypto Fear and Greed Index, the industry may actually be taking a string of bad news in stride.

The index score hit a low of 20/100 at the end of last week, clearly indicating that the market sentiment is "extreme fear".

This is down 50% from the three-month sentiment peak of 40/100 on November 6.

Still, the full year 2022 score is much lower at just 6/100.

A further shock, even another 50% drop from current levels, would only bring sentiment to the area that usually marks BTC/USD macro price bottoms - around the 10/100.

Cryptocurrency Fear and Greed Index (screenshot) Source: Alternative.me