The first notable factor to emerge from Bitfinex Alpha‘s weekly report is that despite the implosion of the Terra Luna ecosystem and the collapse of FTX, there is still strength rising in the crypto market.
It is worth recalling that Luna collapsed due to an attack perpetrated by a person or a group who carried out short selling on the value of the LUNA cryptocurrency.
FTX, on the other hand, collapsed following an official report from CoinDesk, which explained some irregularities regarding FTT, the platform’s native token.
Summary
Bitfinex Alpha Report: the crypto market after Luna and FTX
Between these macro contrarian events and the Silicon Valley Bank (SVB) and USDC crisis, net realized losses on Bitcoin began to rise, triggered by BTC’s depreciation to its lowest since December.
In fact, we see the price of Bitcoin depreciated to $19,500 last week, moving below the February low, before rebounding. On the other hand, SVB’s demise is a classic case of poor risk management in a rising rate environment.
The stress seen on USDC is probably the same.
However, Bitfinex does not predict a collapse for USDC, but estimates a “fair” value of less than $1. In any case, Bitfinex analysts reveal, after a closer look, that it is only new investors who are suffering losses, while long-term holders remain unperturbed.
Specifically, this week’s Bitfinex Alpha report offers an in-depth analysis of the extraordinary collapse of Silicon Valley Bank (SVB) and the de-pegging of USDC, as well as what is on the horizon for Bitcoin this week.
As the report emerges, we see that the price of BTC is currently more than 22% below its current annual high of just over $25,000.
However, long-term indicators still point to strength in the cryptocurrency market, and thus the current pullback may be close to forming the highest expected low in the past three weeks.
Meanwhile, Bitcoin’s net realized gains and losses indicator suggests that the market has returned to a regime of significant realized losses.
Thus, it is important to remember that we are still in the latter stages of a bearish market and not at the beginning of a bullish market.
It would be premature to say that the market has become fully bullish, however, the current increase in net realized losses still pales in comparison to the peak seen during the collapse of Luna or the collapse of FTX. This is a testament to the increase in the inherent strength of the market compared to 2022.
Bitfinex on the Bitcoin situation and crypto in general
Fundamentally speaking, however, with rates expected to continue rising, investors are migrating to risk-free assets, which paradoxically is creating additional risk in the financial system.
The concentration of capital in short-term securities, instead of lending to the broader market, increases the risk of reduced liquidity in the banking system.
For smaller banks with reduced access to funding sources, this becomes a source of stress, with the closure of SVB as an example of what can happen.
As a result, bank stocks have already begun to fall. The Bitcoin options market has also expressed a negative view on future short-term prices, with the 25% delta skew on options expiring in a week’s time dropping to the lowest since December.
Net realized losses on Bitcoin have also increased, but a closer look reveals that these are relatively new investors sitting on losses. While long-term holders remain unperturbed.
In fact, even in the options market, while the 25% delta skew on the one-week, 30-day and 60-day options is negative. The skew on the longer-term 90- and 180-day options is closer to zero, indicating that the price decline is unlikely to be lasting.
Meanwhile, the cryptocurrency news agenda remains full. In the last week, Silvergate Bank announced that it would close its operations and liquidate its assets following recent developments in the sector.
Blockchain.com suspended its asset management subsidiary, Blockchain.com Asset Management (BCAM), citing the prolonged cryptocurrency winter.
In addition, New York’s attorney general sued cryptocurrency exchange KuCoin for allegedly operating in the state without proper registration.
In more positive news, Voyager Digital obtained court approval to sell its assets and transfer its customers to Binance.US in a deal worth $1.3 billion. On the other hand, FTX Trading and its affiliated debtors continue in their claim to recover funds for FTX users.
How many funds has FTX recovered so far?
FTX has recovered more than $5 billion in cash and crypto assets. The amount, however, is far less than what it owes its creditors, who were affected by the bankruptcy of the cryptocurrency trading platform founded by Sam Bankman-Fried.
This was stated by a lawyer for the cryptocurrency exchange in a Delaware bankruptcy court. Regulators are currently trying to piece together the vast crypto empire.
FTX is also working to liquidate another $4.6 billion in less convertible assets based on “book value,” said company attorney Andrew Dietderich. However, it is unclear how much of that book value FTX will be able to recover by selling the assets.
FTX, which owes 3.1 billion to its 50 largest creditors and at least 5 billion to its nine million customers and smaller creditors, filed for bankruptcy 11 November between FTX and Bankman-Fried’s Alameda Research investment fund.
According to Dietderich, it is not yet clear how much the liquidation fund will amount to for FTX’s creditors. Considering the still significant gap in values between the company’s assets and liabilities.
In any case, documents filed in Delaware bankruptcy court revealed the list of FTX equity investors who are likely to see their investments in the company once valued at $32 billion reset to zero.
Billionaires Peter Thiel, Daniel Loeb, Robert Kraft and Paul Tudor Jones, Shark Tank’s Kevin O’Leary and NFL star Tom Brady and his former wife supermodel Gisele Bundchen are among those included in the document.
