The events over the last week have shaken the crypto world to the core. With good reason there has been fear and panic. Traders and investors were beginning to resemble a Knives Out style murder mystery, not knowing who to trust and who is about to stab them in the back. Now that FTX has finally declared Chapter 11, the next question is, what now?
The biggest unknown at this point is how many crypto positions need to be liquidated, and if there is going to be contagion. There will likely be other players that fall, not through their own fault but a collateral damage of the FTX scandal. This will push the markets mildly lower in the short term, but guess what? The worst is likely over, unless a major player like Binance also goes under, it really can’t get much worse. Credibility of crypto could not be any lower right now, but the technology keeps improving and use cases keep growing.
The FTX will lead to more regulation and transparency, something that made traders skittish in previous years, now, they will embrace it. Investing in a risk asset is stressful enough without worrying about the platform itself. If regulators get this right, individuals will feel comfortable investing in the technology. In other words, without regulated transparency, crypto will not grow, welcome it with open arms.
Does this mean the bottom is in? Sadly I do not believe so. From a technical perspective, Bitcoin could go down to $12,000 before it forms a base, but there will not be a huge influx of money in a risk asset stock markets are so volatile. I expect there will be another leg down in the stock market to the 3200 region on the S&P 500. This could create panic selling in crypto pushing BTC down to even the $10,000 level and Ethereum to $800. The bad news is, we may not make new highs for several years. Trust needs to be rebuilt, blown accounts need to be repaired, but all the while, the technology will keep improving and use cases will keep building, so that when it does breach new highs, the sky really is the limit.
Summary: The stock market will still make new local lows (around 3200 on the S&P 500) and this will create an opportunity to buy Bitcoin between the $10,000-$14,000 region. You will need patience and a long time horizon before you see a substantial reward on that investment.
The biggest unknown at this point is how many crypto positions need to be liquidated, and if there is going to be contagion. There will likely be other players that fall, not through their own fault but a collateral damage of the FTX scandal. This will push the markets mildly lower in the short term, but guess what? The worst is likely over, unless a major player like Binance also goes under, it really can’t get much worse. Credibility of crypto could not be any lower right now, but the technology keeps improving and use cases keep growing.
The FTX will lead to more regulation and transparency, something that made traders skittish in previous years, now, they will embrace it. Investing in a risk asset is stressful enough without worrying about the platform itself. If regulators get this right, individuals will feel comfortable investing in the technology. In other words, without regulated transparency, crypto will not grow, welcome it with open arms.
Does this mean the bottom is in? Sadly I do not believe so. From a technical perspective, Bitcoin could go down to $12,000 before it forms a base, but there will not be a huge influx of money in a risk asset stock markets are so volatile. I expect there will be another leg down in the stock market to the 3200 region on the S&P 500. This could create panic selling in crypto pushing BTC down to even the $10,000 level and Ethereum to $800. The bad news is, we may not make new highs for several years. Trust needs to be rebuilt, blown accounts need to be repaired, but all the while, the technology will keep improving and use cases will keep building, so that when it does breach new highs, the sky really is the limit.
Summary: The stock market will still make new local lows (around 3200 on the S&P 500) and this will create an opportunity to buy Bitcoin between the $10,000-$14,000 region. You will need patience and a long time horizon before you see a substantial reward on that investment.