Bitcoin remains vulnerable near $16k amid FTX contagion
Bitcoin (BTC/USD) traded above $16,000 on Wednesday morning, rising by about 3.2% at the time of writing to hover just above $16,500.
Despite the upside, the flagship cryptocurrency remains vulnerable to the pressure that saw its price fall to lows of $15,655 on Monday. This happened as jitters fueled by the collapse of crypto exchange FTX fanned more selling, not just for the FTX token, but the entire crypto market.
The action across US futures early Wednesday suggested crypto could mirror what happens later in stocks.
Wall Street had closed higher on Tuesday, but ahead of markets opening on Wednesday, S&P 500, Dow and Nasdaq futures were all marginally lower as the US stock market geared for its last full trading day of the week before Thursday’s break for Thanksgiving holiday, and half a day trading on Black Friday.
Bitcoin fell to 2-year lows on Monday
BTC trading above $16,000 puts it at a key support level after Monday’s dump added to 2022’s drawdown to make this year’s downturn the biggest since 2018. And as prices dropped towards $15,600 earlier in the week, the total drawdown since the bull market peak reached 78%.
Indeed, the sell-off followed the total bitcoin market realized loss hitting $1.9 billion on Friday last week, the fourth largest realized loss on the daily log in Bitcoin’s history. On-chain data provider Glassnode highlighted the top three times this has happened in the past:
Market intelligence platform Santiment says the latest drawdown to under $16k forced more weak hands to exit the market. However, Bitcoin was at the same time “seeing the lowest level of transactions made while in profit since Nov, 2019.”
According to the on-chain and social metrics analytics provider, Bitcoin price has typically seen a bounce when the above metric trends markedly negative.
Charlie Billelo, the founder and CEO of Compound Capital Advisors, highlighted on Tuesday that Bitcoin’s bearish run had held for 376 days – the longest drawdown since prices remained in a downtrend for 410 days in 2013-2015.
Bitcoin took 1,181 days after the 2015 bear market to reach a new high, while recovery lasted 1079 days to a new peak after 2018.
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