Multicoin Capital says more pain ahead, how will Bitcoin price react?

  • The Securities Commission of The Bahamas (SCB) stated that it had transferred assets out of FTX’s subsidiary, FTX Digital Markets, to another digital wallet.
  • Investment firm Multicoin Capital believes that the crypto market is set to deteriorate further.
    Bitcoin (BTC) price is currently trading at $16,850 and would need to attain a 34% rally to climb back to the mid-June price of $22,500.

FTX exchange’s standing continues to worsen as the bankrupt firm faces more scrutiny from regulators. The repercussions of the exchange’s collapse have led to severe disruptions in the crypto market. In the wake of this situation, Bitcoin holders might decide to safeguard their investments by selling them off at this price level.

FTX’s woes deepen

FTX was at the crosshair of the Securities Commission of Bahamas (SCB) earlier this week. As reported by FXStreet, the regulator joined hands with the Financial Crimes Investigation Branch to investigate FTX’s misconduct. The development came after FTX stated it would begin facilitating withdrawals of Bahamian funds at the behest of the SCB, which the commission soon refuted.

However, recent revelations show that the SCB had already taken action against the exchange days before launching its investigation. In an announcement on November 17, the regulatory body stated that it took control of FTX Digital Markets’ (FDM) assets by transferring them to a digital wallet controlled by the SCB. The commission stated that they did so to keep the assets safe and protect the interests of clients.

The move makes sense as FDM’s management of the assets had become worrisome, and the same was also verified by the exchange’s liquidators. As per court filings, Joint Provisional Liquidators suggested that the bankrupt exchange might have committed serious fraud and mismanagement.

This makes things worse for FTX and the crypto market as well, a sentiment shared by investment firm Multicoin Capital. The crypto venture firm informed its investors in a letter on Thursday that further downfall is expected before the market rebounds. 

Multicoin went on to state that the fund had already declined by 55% this month as they had too many assets on FTX. The fund believes that it might be able to recover some of its funds, but the ongoing bankruptcy proceedings will make it difficult. Furthermore, Multicoin believes that the situation could deteriorate, stating,

“Many trading firms will be wiped out and shut down.”

Bitcoin price rise may not be fruitful

Bitcoin price is currently trading at $16,833, but the volatile movement could take the king coin in either direction. 

If the buying pressure remains consistent, Bitcoin price would be able to breach its immediate resistance at $17,199 to initiate an uptick to tag $17,729. However, a rise to mid-June price ($22,590) demands a rally of 34.43%, which would require Bitcoin to flip the inefficiency of $18,730 to $19,229, labeled as Fair Value Gap (FVG) into support.

June lows, which were once the support level for Bitcoin price, now represent a sell-off opportunity for stranded investors. Since BTC has stayed below the $22,590 mark for about three months now, any instance of recovery would motivate these investors to seek a break-even haven.

BTCUSD 4-hour chart

BTCUSD 4-hour chart

Based on IntoTheBlock’s Global In/Out of the Money (GIOM). the price range between $17,900 and $23,900 harbors roughly 6.21 million addresses that purchased over 3.06 million BTC at an average price of $20,509. These holders are currently sitting “Out of the Money” and will likely sell their holdings if Bitcoin price reaches its breakeven levels, triggering a reversal.

This outlook is crucial in understanding the market sentiment and coincides with the stale outlook from Multicoin Capital after FTX’s collapse.

Bitcoin between $17,900 and $23,900

Bitcoin between $17,900 and $23,900

On the other hand, if Bitcoin price does not recover at all and declines further, it would retest the $16,215 support level. Drawdown from here could see BTC tagging the critical support at $15,791, losing which could invalidate the bullish thesis, pushing the king coin toward the lows of $15,000.