Bitcoin Set for More Losses in Wake of FTX’s Collapse if History is a Guide


Author: Akshay Chinchalkar, Cross Asset Editor

  • Weak December almost always follows November losses in token
  • Question is whether balm of a less fiery Fed will ease anxiety

A seasonal cryptocurrency pattern points to more losses for Bitcoin in December in the wake of the seismic collapse of the FTX exchange.

The largest token sank 16% in November and over the past decade it always went on to have a weak December following declines in the prior month, according to data compiled by Bloomberg.

The pattern was evident in 2018, 2019 and 2021, leaving an average December slide of almost 11%. If history repeats, crypto may lag stocks given heightened expectations for this quarter’s equity rebound to continue in the run-up to Christmas as the Federal Reserves swivels to smaller interest-rate hikes.

“The digital asset class is working through a period of contagion, where assessing counterparty credit risk and solvency remains imperative,” said John Toro, head of trading at digital-asset exchange Independent Reserve. “It seems most likely that during this period of heightened credit risk, Bitcoin will underperform other high-beta risk assets.”

Bah Humbug

Bitcoin’s November drops have trickled into December

Crypto markets swooned in the period around the Nov. 11 bankruptcy of Sam Bankman-Fried’s FTX trading platform and sister investment house Alameda Research. They steadied as the month wore on, propped up in part by signs that the Fed will switch to less aggressive monetary tightening.

“We would be more biased to a steadier, positive December as some of the excess fear and extreme extrapolations of contagion recede,” said Richard Galvin, co-founder of fund manager Digital Asset Capital Management. “Added to that, the macro environment remains more positive — for the time being.”

The worlds of traditional and digital finance alike remain transfixed by the wreckage of FTX, which at one point boasted a $32 billion valuation but whose founder Bankman-Fried now professes to have only $100,000 in the bank.

Former Federal Deposit Insurance Corp. Chair Sheila Bair said US regulators “need to crack down” on the most problematic aspects of crypto in the wake of the collapse of FTX and related entities.

Galaxy Digital Chief Executive Officer Mike Novogratz dropped his forecast for Bitcoin to climb to $500,000 in five years, citing tightening monetary policy, while adding that the token will get there eventually.

Bitcoin was little changed and trading just below $17,000 as of 12:25 p.m. in Singapore, while second-ranked Ether was steady at $1,272. A gauge of the top 100 tokens has shed more than 60% this year amid a prolonged crypto rout that toppled a number of digital-asset businesses.

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