“It’s incredible to see how bitcoin reacted to the news of Genesis’ bankruptcy,” a prominent cryptocurrency columnist tweeted Monday, admiring the top cryptocurrency’s restrained reaction to a statement from one of the largest institutional cryptocurrency lending companies for bankruptcy protection.
Bitcoin (BTC), the leading cryptocurrency by market value, was trading in stasis at about $21,000, up 0.7% in 24 hours after news of Genesis hit the net. According to CoinDesk , the second-largest cryptocurrency, ether (ETH), changed hands around $1,545, up 1.2% .
However, not everyone was surprised by the resilience of bitcoin and ether.
“The market seems to have anticipated the Genesis bankruptcy filing within the last 48 hours, as the GBTC discount suddenly increased again. With the Genesis bankruptcy filing, this removes the negative overhang from the market and crypto investors can finally focus on fundamentals,” Marcus Thielen. , head of strategy and research at crypto services provider Matrixport.
The discount in Grayscale Bitcoin Trust Shares (GBTC) to the underlying bitcoin held in the fund increased from 36% to 42% this week, according to YCharts. Grayscale, Genesis and CoinDesk are independent subsidiaries of Digital Currency Group (DCG).
The threat of Genesis’ bankruptcy has been growing ever since the lender froze withdrawals after the stunning collapse of Sam Bankman Fried’s FTX exchange in November.
And fears of an FTX contagion kept the cryptocurrency market under pressure in the last two months of 2022, even as macroeconomic headwinds became tailwinds and traditional risk assets rose.
“Everybody knew this was coming,” said Mike Alfred, a value investor and founder of digital asset investment platform Eaglebrook Advisors, referring to the steady price movement in the market.
Alfred, however, warned of a continued stream of bad news ahead. “There are 2-4 more firms that are insolvent on currency, and it will probably take a shock from the real economy to reveal that. Rising rates combined with a significant surge in volatility and/or sovereign debt issuance could cause a few more firms to fall.” noted Alfred.
Nevertheless, the market may continue to show resilience to bad news given the lack of sellers in the market, as CoinDesk analysts reported earlier this month.
In addition, the cryptocurrency market has seen a bullish revival this month, with bitcoin and ether up 27 percent and 29 percent, respectively, and experienced traders struggling to increase their upside risk.
“Transaction volumes on the Ethereum blockchain have started to grow again, and this has led to the cryptocurrency outperforming traditional assets such as U.S. stocks by 25% since the beginning of the year,” Thielen said.
Thielen said the path of least resistance for the market is on the higher side ahead of the seasonal bullish period of the Chinese New Year. This year’s period begins Jan. 22 and ends Feb. 9.
“Buying bitcoins at the end of the first day of the Chinese New Year and selling them 10 trading days later would yield an average of +9%, with all of the last eight years (2015-2022) showing positive returns. the hit ratio is 100%.”