Bitcoin Responds to FTX Contagion by Heading for a Weekly Gain
There can be little doubt that crypto investors expect more firms to blow up in the treacherous wreckage of the wipeout at FTX. Their confounding response has been to drive up Bitcoin this week.
The token is up some 3% over the period, topping global stocks, while a gauge of the leading 100 virtual coins has added about 1%. That compares with Bitcoin's 23% slide last week as Sam Bankman-Fried's FTX empire collapsed.
To recap the backdrop: FTX's chaotic bankruptcy left even the man who liquidated Enron Corp. flabbergasted and put the likes of crypto lender BlockFi Inc. on the cusp of their own Chapter 11 filings. An industry recovery fund proposed by Binance Holdings Ltd. remains long on hope and short on details.
“Everyone is trying to figure out” why crypto markets have been resilient in the past few days despite it all, said John Toro, head of trading at digital-asset exchange Independent Reserve. “But the counterparty risk will take a couple of months yet to play out in markets.”
Crypto historians might argue the counterintuitive Bitcoin performance will continue. Since a low in 2018, Bitcoin has posted a weekly loss of at least 20% six times apart from the recent slide. The token jumped almost 9% on average over the subsequent month, according to data compiled by Bloomberg.
Other parts of the cryptoverse signal caution. For instance, part of the Bitcoin futures curve is in backwardation, where the spot price is above the futures price. That can be taken to indicate bets on declines in the world's largest digital asset. An index of expected volatility in Bitcoin has also jumped.
JPMorgan Chase & Co. strategists led by Nikolaos Panigirtzoglou also pointed to a $25 billion outflow from crypto since May due to redemptions of
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