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Bitcoin (BTC) fell 22% in the seven-day stretch through Sunday, and analysts are scrambling to assess the outlook – for digital-asset markets as well as possible policy ramifications – amid an annus horribilis for the blockchain industry, freshly wounded by the FTX scandal.
As a new week starts, the market is still searching for a bottom: The CoinDesk Market Index (CMI) is down 0.8% over the past 24 hours.
Here’s a sampling of the commentary:
- Sean Farrell, head of digital-asset strategy, FundStrat: “In the past six months, we have witnessed the unraveling of a web of leverage that entangled the crypto space. It started with LUNA/UST, seemingly resolved in the 3AC unwind, only to find that SBF now appears to have been insolvent as well. … We think it is appropriate to wait for lower lows as there is good reason to think that there will be other casualties, which could lead to forced selling or, at the very least, bad headline risk.”
- Joe DiPasquale, CEO of BitBull Capital: “The last few days have seen the space shaken by the collapse of SBF’s empire, and expectedly, despite traditional markets showing some strength, BTC and crypto took a hit due to poor sentiment. Even though BTC has settled around $16,000 for now, the extent of the damage to other companies, funds, exchanges is as yet unknown, and may come to the fore in the weeks to come. As before, we believe BTC under $20,000 is an attractive long-term accumulation zone, but we also remain cautious until the current situation is satisfactorily resolved and sentiment appears to start moving toward relative normalcy. Notably, the last few days have seen a significant drop in exchange reserves for BTC and stablecoins, indicating a lack of trust and prevalence of fear in the market. We will be monitoring for signs of returning confidence among the masses as a positive indicator.”
- David Duong, head of institutional research, Coinbase: “The relative crypto market stability of recent months was interrupted. … We have seen broader market instability despite some positive macro developments for risk assets as a whole. … It’s still emerging which counterparties may have lent or interacted with either FTX or Alameda and what those exact liabilities are. … BTC could not only retest 2022 lows but touch the $13K level. … We think there is support at $13.5K.”
- Arcane Research newsletter: “This situation is a mess. … One of the largest crypto companies in the industry was playing with customers’ money. An embarrassment for the industry, but it also reminds us of what an unregulated Wild West this still is. The contagion from this will undoubtedly evolve over the next weeks.”
- Galaxy Digital newsletter: “It’s likely that FTX depositors who still have funds stuck on the exchange will be considered unsecured creditors and face a lengthy legal process. While several firms have proactively and publicly offered some transparency on exposure to FTX, the totality of industry exposure remains unknown at this time… An enormous amount of money is at stake (perhaps lost), but the impact of FTX’s collapse is even further magnified by the exchange’s wide-ranging marketing efforts and Sam Bankman-Fried’s prominence … The size of his advocacy and extremeness of his collapse cannot be understated and will have long-lasting ripple effects in Washington for crypto policy.”
- GSR weekly crypto recap: “It’s sad that 2022 in crypto hasn’t been about the potential of crypto but rather about leverage, greed, fraud and lack of transparency – the very things the people involved accused TradFi of and vowed to change.”
- Pantera Capital’s Blockchain Letter: “In the short term, there will be pain for those who lost funds held on FTX’s exchange. More broadly, we expect further price volatility across the crypto ecosystem as fears of contagion drive asset holders to adjust their portfolios. Assets linked to FTX (Solana and projects built on it, Aptos, etc.) will likely be hit hardest. …The episode will also probably be a setback to adoption, as some retail users who lost funds choose to leave the space, and others who may have joined sooner are scared into staying on the sidelines. We expect institutions previously wary of the space to deepen their skepticism.”
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