Justin Arzadon
6 minutes reading time
Bitcoin and the broader crypto market experienced massive volatility and finished lower last week as the industry faced another contagion event. Crypto exchange FTX has collapsed and filed for bankruptcy. Over $200B was wiped off the value of crypto markets in the worst two days of the week and bitcoin hit multi-year lows of US$15,682.
At the time of writing, bitcoin is trading at US$16,706. Ethereum underperformed bitcoin for the week, down -22.96% vs bitcoin’s -21.11%.
Bitcoin’s market capitalisation fell to US$320.8B, with the total crypto market cap sinking to US$847B. Bitcoin’s market dominance has fallen to 38.26%.
| Price | High | Low | Change from previous week | |
| BTC (in US$) | $16,706 | $21,053 | $15,682 | -21.11% |
| ETH (in US$) | $1,244 | $1,634 | $1,083 | -22.96% |
Source: CoinMarketCap. As at 13 Nov. 2022. Past performance is not indicative of future performance. Performance is shown in US dollars and does not take into account any USD/AUD currency movements.
Source: Glassnode. Past performance is not indicative of future performance.
Crypto news we’re watching
FTX files for bankruptcy protection in the US
The crypto world was shaken this week after a series of events over eight days led to the collapse of one of the largest crypto exchanges in the world, FTX. It all started with a leaked report. On November 2nd, a report revealed that the trading firm Alameda Research, founded by Sam Bankman-Fried (SBF), suggested the company held approximately US$5.8B out of US$14.6B of its assets in FTXs exchange token, FTT, leading to questions about the relationship between the two firms.1
We go into more detail about this situation in this article.
FTX goes from bad to worse following hack
Having already filed for Chapter 11 bankruptcy protection in the US, FTX confirmed rumours of a hack just hours later after seeing more than US$600M flow out of exchange crypto wallets. Officials at FTX instructed all users to delete FTX apps, not to install any upgrades and avoid its website. Through Telegram, an FTX account administrator wrote: “FTX has been hacked. FTX apps are malware. Delete them. Chat is open. Don’t go on FTX site as it might download Trojans.”
Largest cryptocurrency seizure in history
The US Department of Justice (DOJ) announced that it has seized over 50,676 bitcoin, the largest cryptocurrency seizure in its history and “the department’s second-largest financial seizure ever.” At the time of the seizure on Nov. 9th, 2021, the bitcoin was valued at US$3.36B. The crypto seized is connected to the case of convicted Silk Road thief, James Zhong, who pleaded guilty “to committing wire fraud in September 2012 when he unlawfully obtained over 50,000 bitcoin from the Silk Road dark web internet marketplace.”3
According to reports, the US government is now the second largest publicly known holder of bitcoin with over 214,682 BTC, the majority coming from three major forfeitures dating back to November 2020. The largest publicly known holder of bitcoin is Grayscale’s Bitcoin Trust (GBTC) with 643,572 BTC.4
On-chain metrics
Bitcoin (BTC): Percent Supply in Profit
This metric shows the percentage of circulating supply in profit, i.e. the percentage of existing coins whose price at the time they last moved was lower than the current price. As an oscillator, it allows us to better understand the current state of the Bitcoin market. Using a simple threshold at 95% helps to identify potential market tops, and where the relative supply in profit falls below 50%, it can be useful to help identify potential market bottoms and entry points.
According to data from Glassnode, the Percent Supply in Profit is down to 47.4% which is the lowest level since March 2020, when the price was just below US$5,400.
Source: Glassnode. Past performance is not indicative of future performance.
Bitcoin (BTC): Exchange Balance
This metric shows the total amount of bitcoin held on exchange addresses. Flows onto and off exchange are usually seen as bullish or bearish. However, due to the recent collapse of FTX, confidence in centralised exchanges is at an all-time low and the reason for the large coins being withdrawn is most likely due to fear of losing the coins altogether. “Not your keys, not your coins” is the golden rule of crypto as it places the holder of the keys (password) in complete control of your crypto and avoids third party risks.
According to the data on Glassnode, a net total of 80,846 bitcoin (over US$1.3 billion at yesterday’s prices) were pulled off exchanges since Wednesday.
Source: Glassnode. Past performance is not indicative of future performance.
Altcoin news
In altcoin news, tokens associated with FTX CEO Sam Bankman-Fried such as Solana (SOL) also suffered. SOL is down -59.4% over the last seven days. Sam Bankman-Fried has been a big backer of SOL over the years and was an early investor in the blockchain project via Alameda Research, a crypto trading firm. SOL is the second-largest holding of Alameda, representing about 10% of SOL’s market cap. SOL could continue to face selling pressure as holders look to avoid further losses, and borrowers liquidate to shore-up balance sheets or meet demands of creditors.
Solana was designed to host decentralised, scalable applications that work similarly to and improve upon Ethereum. According to Blockworks.co, the SOL token has two use cases; “one is staking, where token holders can stake their SOL and receive rewards. The other allows users to use SOL as payment for fees associated with running smart contracts or other transactions.”6
Investing in crypto assets or companies servicing crypto-asset markets should be considered very high risk. Exposure to crypto assets involves substantially higher risk when compared to traditional investments due to their speculative nature and the very high volatility of crypto-asset markets.
Investing in crypto assets or crypto-focused companies is not suitable for all investors and should only be considered by investors who (i) fully understand their features and risks or after consulting a professional financial adviser, and (ii) who have a very high tolerance for risk and the capacity to absorb a rapid loss of some or all of their investment.
Any investment in crypto assets or crypto- focused companies should only be considered as a very small component of an investor’s overall portfolio.
1. https://www.coindesk.com/layer2/2022/11/09/8-days-in-november-what-led-to-ftxs-sudden-collapse/
6. https://blockworks.co/news/what-is-solana-everything-you-need-to-know-about-the-ethereum-rival/
Off the Chain is published every Tuesday. It provides the latest news on bitcoin and the rest of the crypto market, along with analysis and insights into the world of crypto.
It provides general information only and is not a recommendation to invest in any crypto asset, crypto-focused company or investment product.
