History says Bitcoin is set for more losses in December
A SEASONAL cryptocurrency pattern points to more losses for Bitcoin in December, in the wake of the seismic collapse of the FTX exchange.
Bitcoin, the largest token on the crypto market, sank 16 per cent in November. Based on past-decade data compiled by Bloomberg, the token has always had a weak December following declines in November.
The pattern was particularly evident in 2018, 2019 and 2021, each of which recorded an average December slide of almost 11 per cent. If history continues to repeat itself, crypto may lag stocks amid heightened expectations for this quarter’s equity rebound to continue into Christmas, as the Federal Reserve swivels to smaller interest-rate hikes.
“The digital-asset class is working through a period of contagion, when 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.”
Crypto markets wobbled around the Nov 11 bankruptcy of Sam Bankman-Fried’s FTX trading platform and sister investment house Alameda Research, but steadied as the month wore on. They were propped up in part by signs that the Federal Reserve would switch to less-aggressive monetary tightening.
Richard Galvin, co-founder of fund manager Digital Asset Capital Management, said: “We would be more biased to a steadier, positive December as some of the excess fear and extreme extrapolations of contagion recede. Added to that, the macro environment remains more positive – for the time being.”
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The worlds of traditional and digital finance alike remain transfixed by the wreckage of FTX, which at one point boasted a US$32 billion valuation. Now, its founder, Bankman-Fried, professes to have only US$100,000 left in the bank.
Sheila Bair, former Federal Deposit Insurance Corporation chair, said US regulators “need to crack down” on the most problematic aspects of crypto in the wake of the collapse of FTX and its related entities.
Mike Novogratz, chief executive of Galaxy Digital, dropped his forecast that Bitcoin will climb to US$500,000 in five years, citing tightening monetary policy. Nonetheless, he said that the token will reach that value eventually.
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Bitcoin was little changed and trading just below US$17,000 at mid-day in Singapore; second-ranked Ether was steady at US$1,272. A gauge of the top 100 tokens has shed more than 60 per cent this year amid a prolonged crypto rout that toppled a number of digital-asset businesses. BLOOMBERG
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