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Bitcoin power consumption increased by 41% in one year

Despite the crypto market's capitalisation falling three times from its 2021-high and the appearance of energy-efficient ASICs, Bitcoin miners' power consumption has jumped 41% to 266 TWh in the past 12 months, according to estimates from the Bitcoin Mining Council (BMC). This represents 0.16% of the world's total electricity production and 0.10% of the world's hydrocarbon emissions.

Thanks to the introduction of new ASICs, the energy efficiency of mining has increased by 23% in one year and by 5,814% in the last eight years.



At the same time, the network's hashrate skyrocketed by 73% over the year and continues to grow. Last week, the one-off correction of 13.6% was the biggest in 2022. In other words, new equipment is being put into use at a drastic pace. And while some mining companies are struggling to make ends meet, others are buying up the latest ASICs at bargain prices (read more in "Who's behind Bitcoin's skyrocketing hashrate?").

Bitcoin isn't the only cryptocurrency that uses miners' work, but it does account for 99% of all calculations performed. The authors of the BMC report provided the following visual comparison:



Since the crypto economy's decline, some projects' bankruptcies, energy shortages in certain regions and the pending global recession haven't had a negative impact on Bitcoin mining, the risk of regulatory pressure is increasing. For example, some countries legalise crypto mining and impose an additional tax on the electricity used, while others simply ban it.



Even Greenpeace has launched a campaign against Bitcoin, calling to follow Ethereum and to "change the code, not the climate". The Blockchain Observatory (EUBOF), on the other hand, recommends that EU countries adopt measures to reduce power consumption by miners very soon.

If we compare the different industries in terms of energy costs, Bitcoin mining would fall between computer games and gold mining. When compared to the traditional financial sector, it uses 20 times fewer resources.



In terms of energy consumption by various countries, mining has already overtaken Australia, Spain and Turkey, which seems rather alarming. But the world is still losing a large amount of energy that could completely cover the needs of miners. The University of Cambridge estimates the potential energy from worldwide flaring of associated petroleum gas at 688 TWh, which is 2.5 times the current demand of the crypto network.


StormGain Analytics Team (https://stormgain.com/)
(a cryptocurrency trading, exchange and storage platform)

[stormgain]

Bloomberg analyst: Bitcoin's fair value is at $70,000

Inflation in Europe and the US is hitting multi-year records, and stock markets are falling under the pressure of regulators' monetary policy. In a changing environment, analytical agencies are reviewing their approach to valuing basic assets. Bitcoin has been severely undervalued on a number of parameters.

Inflation in the US exceeds 8%, and the spread across Europe ranges from 6% to 24%. Both energy and food costs are rising, and increasing bread production expenses have already led to the closure of 1 in 10 bakeries in Belgium, according to the NYT.



In an attempt to control inflation, regulators are raising interest rates, making borrowing more expensive for households and businesses, which naturally slows down the economy. The EUR/USD pair is forecasted to remain at $0.86 if negative trends continue.

The British pound lost 8.2% against the US dollar in Q3 as the UK Treasury proposed tax cuts to support the economy instead of a planned increase. It's not the best solution with a budget deficit and rising national debt. The MPs immediately attacked Prime Minister Liz Truss, who had been in office for just over a month before she resigned on Thursday, 20 October. The pound is almost certain to face further shocks.



Bitcoin acts as a counterweight to fiat money. More of it can't be printed to cover government spending, its maximum issuance is limited to 21 million coins, and the reward for creating a block is halved every four years. By comparison, a third of the current volume of English pounds (the M2 aggregate) has been printed over the past three years, with GDP growing by only 13% between 2019 and 2021.



For Bitcoin, one of the key metrics is total processing power (hashrate), which continues to grow despite the crisis in the crypto industry (see this article (https://stormgain.com/blog/who-is-behind-the-record-growth-of-bitcoin-hashrate) for why). The higher the hashrate is, the more reliable the network is.

Bloomberg Intelligence senior commodities analyst Mike McGlone says Bitcoin is severely oversold, as it should be priced at $70,000 when converted to hashrate capacity. The current level of $20,000 is similar to the cryptocurrency's fall in Q1 2020, when the coin was worth $5,000.



At least a doubling of the price is predicted by Commodity Futures Trading Commission (CFTC) chairman Rostin Behnam when the regulation is passed to him. Just such a proposal has already been submitted for consideration.

However, the above estimates are somewhat ahead of the curve, as the current Fed policy makes the US dollar the financial vacuum cleaner. Bank of America surveyed 371 investment fund managers and found that the US currency was the most popular bet for 64% of respondents in October.


StormGain Analytical Team (https://stormgain.com/)
(a cryptocurrency trading, exchange and storage platform)

[stormgain]

AXS falls on news of unlocking

The crypto crisis has already led to a drop of the AXS token from its November ATH of $165 to yesterday's $10. The news of the unlocking of early tokens has left investors in dismay.

AXS is the token of the popular online game Axie Infinity which players can use to earn money. Axie creatures can be bought and sold in the in-game exchange using NFTs. Last year, the game became the most popular in the crypto space and is the number 1 in terms of sales and player numbers.



As the interest of many players in the game was sparked by the opportunity to earn and invest, the downturn in the crypto industry has led to a significant drop in key metrics such as sales. Back in February, daily sales reached $427m with 641,000 deals, while in recent days sales have dropped below $2m with less than 100,000 deals.



Next week, 21.5 million tokens will be unlocked with a value of $225 million, or 8% of the total tokens that developers, advisers and early investors received in 2020. According to official figures, Axie Infinity sold 10.5 million tokens and raised $864,000 in a private token sale. In other words, investors paid 8 cents for each token, more than 100 times the current price.



Of the $225m, $20m will be available to investors, $25m to advisers and $57m to in-house developers. The remaining 11 million tokens will be used for future payments.



About half of the funds ($102m) may be sold immediately on the unlock date, which would put considerable downward pressure on the price with a total capitalisation of only $878m. Anticipating the possible negative consequences, some investors are already selling off their AXS tokens, driving the price down to new lows.


StormGain Analytics Team (https://stormgain.com/)
(a cryptocurrency trading, exchange and storage platform)

[stormgain]

A fake Nakamato network has been attacked by an unknown miner

When Bitcoin Cash underwent a hardfork at the end of 2018, the Bitcoin SV (Satoshi Vision) network appeared, headed by Craig Wright. To promote his pet project, Wright presented himself as the creator of Bitcoin and worked with his partner Calvin Ayre to pump the token. However, the claims of the crypto community and subsequent lawsuits sealed the token's fate.



In 2015, Wired magazine published an investigation that found that Craig Wright was possibly hiding behind the personality of Satoshi Nakamoto. The evidence provided, however, was circumstantial. Wright was using the e-mail address [email protected] instead of [email protected] and made one of the first entries about the cryptocurrency's launch on 10 January 2009 (taking into account the difference in time zones, the publication took place on the same day).

In 2016, Wright came out under his own name with an announcement that he was Nakamoto, presenting a few unconvincing arguments to support his claim. In November 2017, he headed the Bitcoin Cash hardfork that resulted in the appearance of Bitcoin SV. According to him, Bitcoin and Bitcoin Cash had moved away from the key idea behind them, and only BSV reflected the true approach.

As a result of the pump with his partner, the billionaire Calvin Ayre, who specialised in gambling, the pair were able to drive BSV's price up threefold in half a year to $240. In 2022, Wright sued Magnus Granath, known as Hodlonaut and who launched the #CraigWrightIsAFraud movement on social media, for defamation.



Last week, a court ruled in Granath's favour, finding that his use of the words "scammer" and "fraud" against Craig Wright was fair. Wright has not provided any substantive evidence to back his claim of being associated with the pseudonym Satoshi Nakamoto. In addition, documents that were supposed to weigh in Wright's favour were found to be fake.



In September, an unknown miner (shown on the chart in black) captured 60% to 80% of the hashrate for assembling empty blocks in the BSV network. On average, a block includes about 30,000 transactions. As a result, the sabotage caused a significant delay in transactions.

The Bitcoin Association that promotes BSV called this approach dishonest and urged the miner to get in touch immediately. If the miner doesn't, the not-for-profit organisation promises to send an appeal to law enforcement agencies.

According to unconfirmed reports, Craig Wright's associate Calvin Ayre, whom Wright also misled about his identity, may be behind the attack on BSV.


StormGain Analytics Team (https://stormgain.com/)
(a cryptocurrency trading, exchange and storage platform)

[stormgain]

Opposing the whales, shrimps buy up Bitcoin's dip

October risks being the quietest month in Bitcoin history, but behind the external calm, there are two opposing forces. Whales (>1,000 BTC) continue to get rid of coins in anticipation of further worsening macroeconomic conditions, while shrimps (<1 BTC) are building up their reserves.

Stagnation is seen in the low network activity, and the rate of new addresses is at a level last seen in mid-2017. The total volume of transfers expressed in US dollars shows a similar picture, dropping to $19.2 billion per day.



Bitcoin's uncharacteristic calm came after a number of crypto projects went bankrupt and crypto tourists fled, leading to the price consolidating around the $20,000 level.



But participants' assessments of the level vary. For example, whales reduced their reserves by 3.3% to 5.61 million BTC during the consolidation period. Public miners, whose current holdings are estimated to be at least 78,000 BTC, stand out in this group. BTC per month. During the summer months, mining companies sold more coins than they mined due to unbalanced financial policies and sharply reduced cash flow. Yields per capacity hashrate continue to update all-time low levels.



On the other hand, shrimps are enthusiastic and trying to find the bottom of Bitcoin. Between June and October, they increased their reserves from 3.71 million BTC to 3.77 million BTC.



Another positive factor for the price is the continued outflow of coins from cryptocurrency exchanges to cold wallets. This usually indicates a reluctance of participants to part with Bitcoin and a willingness to wait out the storm in a safe place. The total volume of coins on exchanges has fallen to January 2018 levels, with 123,500 BTC withdrawn in the current month alone. BTC per month.



However, one should bear in mind that the current environment isn't favourable for investing in risky assets. With a 97.2% probability, CME's FedWatch tool predicts another 0.75% Fed interest rate hike. The regulator's next meeting is scheduled for 2 November.

A tighter monetary policy will increase financial outflows in favour of US Treasury bonds and the US dollar. For whales, this is another reason to continue offloading their accumulated BTC in anticipation of another wave of Bitcoin declines.


StormGain Analytics Team (https://stormgain.com/)
(a cryptocurrency trading, exchange and storage platform)

[stormgain]

Fed losses will lead to Bitcoin's growth

Distortions in monetary policy are leading to increased uncertainty. US Treasury Secretary Janet Yellen is warning of risks to financial stability, while analysts at Bank of America are calling Bitcoin a potential saviour from inflation.



How everything started

The Federal Reserve is the biggest power in the global financial market, and the US dollar accounts for 59% of the volume of international reserves. The Fed's policy predetermines the actions of other financial regulators and sets the main flows for international capital.

During the 2008 global financial crisis (which began with the US mortgage crisis), the Fed more than doubled its balance to support the economy, buying up assets and injecting money into the economy. During the last growth period between 2010 and 2020, the regulator was supposed to offload this balance but didn't do so.

With the arrival of the COVID-19 pandemic in 2020, the Fed has again more than doubled its balance sheet, and the dollar money supply (M2) has grown by 35% in two and a half years.



Consequences

The subsequent inflation was not only a natural phenomenon but an inevitable one, too, given the extreme monetary injections. To stop it, the Fed is raising interest rates, making borrowing money more expensive. As a result, this year, the Fed has accumulated a debt with the US Treasury of $5.3 billion.



The US national debt is $31 trillion, and servicing it is becoming more expensive. In the period from October 2021 through May 2022 alone, interest payments rose by 30% to $311 billion. In the next 10 years, the payments are forecast to reach $8.1 trillion.

A series of analysts justifiably assume the Fed will be forced to loosen its grip ahead of time and eschew further hiking interest rates at the beginning of next year. If by this time, inflation doesn't reach the target zone between 2.0-2.5% (something which is unlikely), the regulator will have a really hard time.

Change in sentiment

If the above scenario plays out, a number of analysts, including those at Bank of America, expect the dollar to weaken as interest in deflationary assets grows. In this regard, they note Bitcoin's growing correlation with gold:

Bitcoin is a fixed-supply asset that may eventually become an inflation hedge.



The Fed is currently trying to tame inflation by quickly raising its key interest rate. This has already led to an increase in the regulator's losses, which will need to be repaid in the future. The interest rate hike is also leading to increased payments on government debt, an economic slowdown, the decreased competitiveness of American goods in the international market and a number of other negative factors. This could force the Fed to loosen its grip sooner than it wants, but then inflation would strengthen its position and Bitcoin would return to growth.


StormGain Analytics Team (https://stormgain.com/)
(a cryptocurrency trading, exchange and storage platform)

[stormgain]

Let it Uptober?

Bitcoin's rise above $20,000 yesterday was a surprise for the bears: $552 million worth of short positions were liquidated during the day. In total, sellers' losses for all instruments amounted to $1.13 billion.



The latest rise should cheer up investors because the stress level measured in coins at a loss is close to all-time highs. According to Glassnode, over 8 million BTC were bought at higher prices (based on the 30-day moving average).



Historically, October has been a favourable time for Bitcoin, with seven out of nine years showing gains of between 10% and 61%. And with the latest increase, there's every chance of this October once again securing the title of Uptober.



Positive factors for Bitcoin include both intra-network and macroeconomic ones. The former includes the continued outflow of coins from cryptocurrency exchanges to cold wallets, resulting in the aggregate balance falling to January 2018 levels.



Macroeconomic factors include the devaluation of several national currencies and tighter financial supervision. For instance, after Xi Jinping's re-election to a third term, the yuan and the Chinese stock market collapsed, and interest in cryptocurrency is trending again.



China had previously pursued a tight financial policy aimed at reducing capital outflows. For example, citizens can't withdraw more than 100,000 CNY ($13,800) from their account or card abroad in a one-year period. Transfers from China overseas are even more restricted, and amounts of $10,000 or more are likely to be blocked by banks with a requirement to provide additional transaction details.

Xi Jinping's re-election hints at the further tightening of financial supervision in a country with a total of $55 trillion in deposits. This is more than double the US GDP in 2021 ($23 trillion).


StormGain Analytics Team (https://stormgain.com/)
(a cryptocurrency trading, exchange and storage platform)

[stormgain]

The biggest mining company is on the verge of bankruptcy

The cryptocurrency market's fall and the continuing 'arms race' among public mining companies are leading to the restructuring of the crypto mining market. Leading company Core Scientific (CORE) sold off its entire Bitcoin holdings and is warning investors of the risk of bankruptcy. After the news emerged, its stock fell by 80%.



Core Scientific has the largest hashrate among public companies, and, until recently, it's been announcing plans to increase its capacity. The equipment it uses allows it to mine over 1000 BTC per month.

Before the crypto market's crash in May, CORE ranked second among miners in terms of BTC reserves, naming hodling as its main strategy. If it had continued to hold coins, the company would have become the leader in this indicator back in June.



However, all factors combined led the miner to the edge of bankruptcy. This was primarily influenced by excessive optimism in assessments of the prospects for 2022 and the absorption of smaller players along with their debts. For instance, in July 2021, CORE acquired Blockcap for $1.2 billion, although the company had a modest net asset value of $142 million. As a result, the company became the market leader in another indicator: cumulative loss.



In an attempt to tie up loose ends, CORE has sold off its entire Bitcoin stock in the past four months, a total of 15,000 BTC per month. It currently has 24 BTC in its balance. It also reached an agreement with B. Riley regarding the right to sell $100 million worth of stock. However, all of these actions didn't have a meaningful impact on the situation. On 25 October, the company filed form 8-K with the SEC.

CORE is advising the regulator that, starting in October, it will freeze payments on obligations and that it's at risk of defaulting on convertible bonds maturing in 2025. The company is also warning of the expectation that existing cash resources will run out by the end of 2022 or sooner and expects bankruptcy proceedings among the potential consequences.



The ruin of the largest public miner will not have a negative impact on the cryptocurrency market. It's highly probable that CORE will be absorbed by a more successful player that's to top the ratings. In an extreme scenario, its equipment will go under the hammer and be deployed under a new banner.


StormGain Analytics Team (https://stormgain.com/)
(a cryptocurrency trading, exchange and storage platform)

[stormgain]

Bitcoin: premature optimism

The cryptocurrency market has seen a resurgence, leading to significant losses among bears in recent months. However, the leading investment force institutional investors remain inactive while the blue whales are selling off their coins.

Uptober expectations (October is statistically a growth month for Bitcoin) and a technical correction in the US dollar index led to a surge in the price of the coin, which crossed the USD 20,000 mark, with cumulative bear losses on short positions exceeding USD 800m for the week.



The purchase of Twitter by Ilon Musk and the pending introduction of crypto-payments give traders cause for optimism. Dogecoin doubled in a week to 12 cents a coin, with veteran trader Peter Brandt claiming the bear market has ended for the meme coin.



However, overall market sentiment is rarely the dominant factor in pricing. For example, blue whales (>10k BTC), which own 15% of the Dogecoin, have been selling off their coins in the last two months.



Since 2020, institutional investors have been the leading investment force in the cryptocurrency market (companies with investments of USD 1m or more). Looking at their behaviour through the lens of cryptocurrency funds, there has been little movement since August.



The weekly net inflows in October averaged at a paltry USD 730,000. And at only USD 22.9bn, the total amount of funds under management is half that of in March.

The coin sell-off by whales and the low level of interest on the part of institutional investors in cryptocurrency is associated with the Fed's upcoming key rate decision. According to the CME's FedWatch tool, there is an 83.7% probability that the regulator will again raise the key rate by 0.75%. The Fed will meet on 2 November.



The Fed is increasing interest rates to fight inflation, which broke a 40-year record this year. Following the rate hike, US bond yields are climbing, which in the context of global economic stagnation and the devaluation of several national currencies has led to the flow of capital into the US dollar. In the event of another 0.75% hike in the key interest rate, there is a high probability that this inflow will intensify, making it hard to see Bitcoin consolidating above USD 20,000.


StormGain analytics team (https://stormgain.com/)
(a platform to trade, exchange and store cryptocurrency)

[stormgain]

Crypto's record-breaking October

Despite ongoing stagnation in the wider cryptocurrency market and near-zero activity among institutional investors, October still saw several new records set.

Bitcoin hashrate and mining difficulty

The 'industrial' mining sector is winning the market turf war as companies with a more balanced financial model continue to gobble up market share from under the noses of their less fortunate counterparts.

In a note to investors last week, top publicly traded miner Core Scientific stated that it could be facing bankruptcy. It currently has more than $1.3 billion of cumulative losses, and Bitcoin's decline in H1 2022 has now led to a severe cashflow deficit. It was unable to get itself out of its current predicament despite taking out numerous loans and selling off part of the biggest reserves in the public mining sector, some 15,000 BTC.



In direct contrast to Core, CleanSpark is buying up ASICs at unprecedentedly low prices, both from the machines' manufacturers and from bankrupt colleagues. During the bear market, companies have purchased an additional 26,500 ASICs, with 3,843 of these most likely purchased from Argo Blockchain. The average markdown on last year's prices stands at around 85%.

Because several miners are still increasing their capacity, the hashrate and network difficulty rose 20% over October to hit a new all-time high.



Bitcoin mining profitability

And since mining difficulty is rising in a climate of low prices, mining profitability also hit a new all-time low. Revenue per exahash thus fell to $66,500 in October, which augurs more tumultuous times ahead for the mining market.



Hacktober

If all that wasn't enough, hackers made sure yet another record was broken in October. According to data from Peckshield, last month saw malicious actors gain unauthorised access to $3 billion worth of coins, of which they were able to make off with $760 million. To put that into perspective, only $1.6 billion worth of assets were compromised over the entirety of 2021.



The worst hit was the Binance BSC blockchain, which had 2 million BNB (worth $586 million at the time) pilfered by hackers. Following timely action to freeze the network, the amount actually stolen was thankfully limited to just $100 million.


StormGain Analytics Team (https://stormgain.com/)
(a cryptocurrency trading, exchange and storage platform)

[stormgain]

The Pros and Cons of Ethereum's transition to PoS

A month and a half have passed since Ethereum's transition from a proof-of-work (PoW) algorithm to a proof-of-stake (PoS) one, where validators replaced miners for putting blocks together. The network still has to undergo a series of planned updates, but some positive and negative effects of the transition can already be identified.

Despite being the second-highest cryptocurrency by market capitalisation, Ethereum was the most advantageous for miners.



Since graphics cards were predominantly used to mine it, Ethereum's transition to PoS led to the graphics accelerator market cooling off. Gamers breathed a sigh of relief as graphics card prices plummeted after news of the merger emerged.

The developers deemed the network's reduced energy consumption to be the transition's key advantage. The lower energy use was in response to ongoing news stories in 2021 about miners' environmental pollution. As a result of the change to the algorithm, the estimated annual energy consumption was reduced from a peak of 112 TWh to 0.01 TWh.



The merger's negative sides lie in the network's increased centralisation, the rise of censorship and the SEC's regulatory encroachment on the cryptocurrency's status, i.e., whether it's a security or not.

To launch a node and receive passive income, you need to stake in blocks of 32 ETH (~$50,000 at current prices).



For a number of crypto enthusiasts, that amount was too much. This led to increased demand for aggregators' services. As a result, Lido Finance alone has a 30.5% market share, with another 32.1% held by cryptocurrency exchanges that comply with US regulators.



Aggregators can use settings that allow them to ignore transactions with addresses included on the blacklist, which generally refers to the one from the US Department of the Treasury's Office of Foreign Assets Control (OFAC). Thus, out of the last 100 blocks, 81 complied with the regulator's requirements, and the average daily censorship rate reached 64%.



On the day of the transition to the PoS algorithm, SEC Chairman Gary Gensler hinted that the ability to passively earn income makes Ethereum similar to a security. In addition, in the current reality, more than half of all transactions take place in the United States, which also requires a stricter approach to regulating the network.

Recent trends suggest that Ethereum is increasingly moving away from the concept of cryptocurrency established by Satoshi Nakamoto as independence from financial regulators and institutions becomes ever more ephemeral. Is this too big a price to pay for energy efficiency?


StormGain Analytics Team (https://stormgain.com/)
(a cryptocurrency trading, exchange and storage platform)

[stormgain]

CBDCs will save us from inflation but lead to dystopia and Bitcoin's disappearance

Central Bank Digital Currencies, also known as CBDCs, are digital state currencies created using distributed ledger technology (DLT). CBDCs differ from current digital currencies that are essentially issued by commercial banks as loan obligations. And, if, at first glance, they seem like the same thing, pay closer attention because the devil is in the details. In the article Pure Evil, former BitMEX CEO Arthur Hayes reveals the reasons for the pessimism about financial regulators' plans.

The digital money currently circulating was created by commercial banks, as has historically been the case. When a consumer or organisation takes out a loan, a corresponding amount is reflected in their account. In this case, the bank's assets may be less than 10% of the issued liabilities, which is called the fractional reserve ratio. As a result of the financial cycle, the actual $100 creates a liability of $900.



This and other rules have led to the ability to pump up the global economy with money from thin air. The US Federal Reserve, whose balance as of today is $8.7 trillion, plays the largest role in this process. Now the time has come to pay up in the form of increased inflation that can't be dealt with even by a shock rise of the key interest rate with the risk of falling into a recession. Unprotected segments of the population have once again come under attack.



On the one hand, the government needs to support citizens and print more money. On the other hand, inflation prevents this cycle from taking place again. Hayes notes that the adoption of CBDCs will be the logical outcome of resolving the dilemma.

If adopted by the central bank model, CBDCs will be produced and controlled exclusively by central banks. At the same time, DLT allows the entire path money takes as it changes hands to be tracked and establishes rules for the end use of money and its lifetime.

By doing so, the government can provide targeted assistance to those in need while limiting their spending to food and essential goods. However, in the same way, this tool can be used against dissenters. If a person is seen at a rally, sends funds to an objectionable person, or writes a critical post on social media, that person's funds could be blocked. To prevent social indignation, the CBDC can still be allowed to be used to purchase consumer goods and pay utility bills.

Since the circulation of cash will soon be significantly limited (the technology allows CBDC funds to be calculated even without an internet connection), blocking digital money will lead to a decrease in the social activity of opposition-minded citizens. Dystopia lurks around the corner.



Here, we can come back to Bitcoin, which uses a blockchain (a subtype of DLT) and is designed to resist pressure from regulators. However, buying it for cold storage will be extremely difficult since all entrances and exits to/from fiat are controlled by regulators.

Hayes notes a reason for optimism, namely, the hope that CBDCs will be launched in a more benign form, with some powers remaining with commercial banks. However, the best time to buy Bitcoin was yesterday, as the opportunities to acquire are becoming fewer and fewer.


StormGain Analytics Team (https://stormgain.com/)
(a cryptocurrency trading, exchange and storage platform)

[stormgain]

Bitcoin: Hodlers' accumulation hits new high

Despite the tough macroeconomic environment, some network parameters suggest Bitcoin's bottom is continuing to form. During the bull run at the end of 2020, hodlers were actively getting rid of coins. Now, however, thanks to efforts to accumulate reserves, the number of inactive coins has reached a new high.



At the same time, the volume of available coins that have been idle for less than six months on the market is at historic lows. This suggests a gradual withdrawal from the market to keep coins in cold wallets in anticipation of better conditions.



User activity is another important indicator. During periods of bull runs and rapid price declines, transfer volumes denominated in US dollars are near all-time highs. On the contrary, when interest in the market cools, the figure decreases. In March 2021, for example, the peak was $13 billion a day, while in September, a local low of $3 billion was reached. It has seen slight growth since then, and a figure above $4 billion would mark a change in market sentiment.



Looking at user activity by transfer volume, the group with transactions up to $10,000 has seen a period of consolidation in recent months. Whereas in the group with transfers of $1 million or more, activity continues to decline. This speaks to major players being cautious and unwilling to search for the bottom until the market actually reverses.



Traders, on the other hand, are overly optimistic, having considered Bitcoin's move above $21,000 a signal of reverse. The funding rate reached a six-month high on 6 November. In other words, traders paid an increased fee to hold a long position in open futures contracts, followed by a correction.



Forming a bottom for Bitcoin is statistically a long and painful process for some participants. On average, this process takes 197 days, whereas the current consolidation has only been going on for less than 150 days.


StormGain Analytics Team (https://stormgain.com/)
(a cryptocurrency trading, exchange and storage platform)

[stormgain]

FTX's collapse was caused solely by internal problems

A claim that Binance deliberately attacked its competitor to buy it at a low price has circulated on social media. However, the combination of factors points to the unsustainable business model of the FTX-Alameda Research partnership, and Binance's actions could only have contributed to a quicker resolution of the internal conflict.

FTX and Alameda Research are owned by Sam Bankman-Fried, who promised to the end that the two projects were completely independent. In fact, a significant portion of Alameda Research's investment company assets were FTT tokens from the FTX cryptocurrency exchange.

As the market boomed in 2020-2021 and by attracting investors, Bankman-Fried managed to secure FTT's growth, which also made Alameda's financial performance skyrocket. The outstanding financial results attracted increasing attention to the project.



Because the connection between the two companies was carefully kept secret, it was difficult for a wider audience to notice the hole between Alameda Research's assets and liabilities. An estimated $6 billion of its $14 billion in assets were backed by FTT tokens. However, cautious investment companies were aware of the problems ahead of time. For example, Orthogonal Credit denied Alameda a loan back in February, noting declining asset quality, unclear financial policies, lack of sound business practices and bureaucratic management to justify its decision.



Binance invested in FTX in the crypto exchange's early days. It held more than $500 million worth of tokens as of early November 2022. After CoinDesk revealed the connection between FTX and Alameda Research on 2 November, Binance's CEO, Changpeng Zhao, decided to eliminate the risk from holding FTT, foreseeing future liquidity difficulties. Zhao also expressed his concerns about Bankman-Frieda's behaviour and behind-the-scenes moves without going into detail. He may have been hinting at a breach of a number of agreements by FTX's owner.

News recently emerged that BitDAO (the Bybit cryptocurrency exchange) demanded to disclose the FTX reserve in BIT tokens. The fact is that, in November 2021, the companies exchanged coins with a public commitment to keep them until November 2024. The day before yesterday, BIT coins dropped sharply, leading blame to fall on FTX's management. For its part, BitDAO confirmed that it held 3.3 million FTT. Later, FTX also provided evidence that BIT remained in its wallet.



Once again, as with Celsius and 3AC, the crypto market faced a situation when projects were mutually indebted to each other. Some invested directly in FTX and Alameda, while others exchanged liabilities or tokens with them. Because of this, one project's problems are causing a crisis in a number of others, which is why the widespread market decline that has affected all coins has emerged.

Changpeng Zhao has already declined to buy FTX. Justin Sun (TRON) has now indicated an interest in acquiring it, but the difficult situation in the crypto market may lead him to change his mind. That said, FTX has already warned that it faces impending bankruptcy unless someone helps the crypto exchange soon.


StormGain Analytics Team (https://stormgain.com/)
(a cryptocurrency trading, exchange and storage platform)

[stormgain]

How Justin Sun (Tron) is making money on FTX's collapse

A crisis for some is an opportunity for others. Justin Sun and Sam Bankman-Fried agreed on a loophole for withdrawals that resulted in the price of Tron coins on the FTX crypto exchange jumping 170% and 1300%, respectively.

In our previous article, we explored the reasons behind FTX's crisis. In an attempt to save a sinking ship, Bankman-Fried froze withdrawals and turned to Coinbase, Kraken, Binance, Tron and other big market participants for help. After the first three declined, Sun announced his intention to explore possibly acquiring the crypto exchange.

It's worth noting that this concerns a subdivision of FTX registered in the Bahamas since financial regulators would most likely block a deal with the FTX US branch.

Details aren't known about the negotiations between FTX and Tron, but it opened up the possibility for FTX clients to withdraw funds using TRX, JST, BTT, HT coins, as well as the Tron blockchain's SUN coin.



Since other withdrawal methods are unavailable, and users are extremely concerned about completely losing their funds, panic buying of Tron network tokens has set in on FTX. As a result, SUN's price rose by 170%, while JST skyrocketed by 1300%. At its peak, the titular TRX coin reached $2.50 but is currently trading at $0.26 despite a market price of $0.06. As such, clients of the crypto exchange are losing about 80% of their capital when withdrawing their funds.



Justin Sun is benefiting from the situation by providing liquidity at inflated prices. The situation will look especially bad if he refuses to buy or provide material support to FTX.

To protect clients' interests and stop the financial bleeding, on 10 November, the Securities Commission of The Bahamas froze FTX Digital Markets and related parties' assets and suspended the crypto exchange's registration. However, the continued high exchange rate for Tron coins on FTX indicates either a withdrawal window at work or users' ignorance.

In addition to the regulator, Tether stepped in by freezing a wallet containing $46 million in USDT (which is issued on the Tron blockchain). This sets a new precedent, as Tether had previously blocked funds only at the request of law enforcement agencies. According to WhaleAlert, the wallet was frozen on 10 November.



More and more signs of FTX's impending bankruptcy are appearing, and this applies to both the Bahama and American branches. Galaxy Digital CEO Mike Novogratz, who has invested $77 million in FTX products, suggested in a recent interview that he'd lost the investment. The size of the FTX group of companies' financial hole is now estimated to be $9 billion.


StormGain Analytical Team (https://stormgain.com/)
(a cryptocurrency trading, exchange and storage platform)