Over the past two days, Bitcoin lost the gains it had made earlier this week and retreated below $17,000.
The Fed is set to continue its hawkish monetary policy, despite slowing down the rate hike cycle. This is a negative factor for assets such as Bitcoin and cryptocurrencies in general.
The market's positive reaction to the Fed's pending policy decision was irrational, despite declining inflation. Even without the FUD around Binance, the digital asset market struggled with massive outflows as well as a nearly total lack of inflows into the industry from both retail and institutional investors.
The price of the leading cryptocurrency has been moving in the same trading range for the past two months. This is a critical factor for highly volatile and speculative assets such as Bitcoin, as they attract most of the trading volume due to its great volatility.
The short-term future of the cryptocurrency market looks bleak, and market players are struggling to find an opportunity to bounce back, given the lack of any driving factors that might get investors to invest in the industry more, especially after the collapse of FTX.
Binance generates FUD but holds steady
According to CryptoQuant, more than $8 billion was recently withdrawn from Binance. The massive outflow occurred earlier in the week with a $902 million being withdrawn within 24 hours.
That amount was very close to the level of the liquidity crisis that FTX experienced in November. Nevertheless, Changpeng Zhao remained unconcerned, assuring that the exchange continues to expand.
Panic gripped the market after Binance suspended USDC withdrawals. Binance CEO Changpeng Zhao explained the situation before the speculation worsened, however.
According to CZ, "the channel to swap from PAX/BUSD to USDC requires going through a bank in NY in USD." Zhao stated that withdrawals could not be processed because the bank was closed.
He added that withdrawals of other stablecoins were still continuing as usual. At the time of writing, the price of BUSD has recovered to $1.
There are reports that Binance's competitors, including Huobi and Coinbase, saw large inflows after the leading exchange experienced sudden withdrawals. Users invested more than $162 million and $124 million in Huobi and Coinbase, respectively.
However, Binance's CEO said the exchange has faced similar problems before, calling them "stress test withdrawals."
Investigation against Binance
Negative news reports about Binance began to circulate earlier this week after Reuters published an article about a US investigation into its operations.
Prominent media outlets reported that US Justice Department prosecutors were divided on accusing Binance of money laundering. The Wall Street Journal also said that Binance's report on its reserve assets was suspicious.
The investigation began in 2018 focusing on combating money laundering and enforcing sanction compliance under US law.
US authorities are investigating whether Binance committed such offenses as failing to obtain a money transfer license, conspiring to launder money, and violating sanctions.
However, Changpeng Zhao said he did not understand the media's motives and that the FUD could be based on a variety of factors. Most importantly, the company remains stable and continues to expand.
Does miner capitulation have a strong impact on the market?
Recently, an analyst has published a comprehensive analysis of the argument that the capitulation of Bitcoin miners could put a lot of pressure on the market, bringing about its collapse.
Over the past few weeks, the topic has been frequently mentioned as market participants discussed whether the adverse situation in the crypto mining industry could prolong the BTC bear market.
A recent report published by analysts at the investment giant VanEck also suggested that the bear market could last into the second quarter of 2023 due to the capitulation of miners. The company predicts that BTC could touch the bottom between $10,000 and $12,000 in the first quarter of next year.
Bitcoin miners not as strong as previously thought
Crypto analyst Hashrate Index believes that miners' overall BTC holdings are not significant enough to have a significant impact on the spot market. All miners must collectively own a significant portion of their turnover assets to have a meaningful impact. However, it remains unclear how many holdings they have, although there are some estimates.
Online data providers such as CoinMetrics and Glassnode have provided the most well-known estimates, categorizing wallet addresses based on their proximity to a Coinbase transaction. These numbers are probably much higher than the estimated Bitcoin assets of miners. CoinMetrics estimates that miners worldwide hold a total of 820,000 BTC.
The Bitcoin holdings of public miners are assessed at 470,000 BTC.
There are currently 19.2 million BTC in circulation, meaning miners hold only 2% to 4%."The public's image of miners as enormous Bitcoin holders and influential market participants might have been accurate ten years ago when the block reward was 50 and miners held a significantly higher portion of Bitcoin's circulating supply. Times have changed, and miners no longer hold a meaningful share of the Bitcoin supply," the analyst wrote.
However, regarding the potential downside pressure, the size of the spot market is also an essential factor, which would determine how well the market can absorb the pressure from bearish traders.
The best way to estimate miners' absolute selling pressure is by looking at how much BTC they receive every day.
In general, every day about 900 newly mined BTC are deposited into miners' wallets. When miners sell less than 100% of their output, they accumulate Bitcoin; when they sell more than 100%, they reduce their holdings.
Seller pressure equal to 100% production represents only 0.2% of spot volume. Because of the small proportion of hypothetical Bitcoin miner volume compared to the total spot volume, Bitcoin should have more than enough liquidity in the spot market to handle selling pressure from miners.
