Bitcoin maintains a certain resistance, despite the earthquake that has hit cryptocurrencies in recent months. Shares of the leading digital currency surged above $17,000 after fears of a debacle following the failure of Sam Bankman-Fried’s FTX exchange. Even in recent days, when stocks have slid on fears stemming from the global recession, Bitcoin has managed to hold its ground without faltering much. Throughout the year there was a very strong correlation between Bitcoin and stocks. The fact that now the turbulence on the stock market does not affect the cryptocurrency too much could be a sign of the strength of the latter which bodes well.
However, the overall picture remains somewhat bleak, as the aftermath of FTX’s default may be stronger than feared. Recently, lender BlockFi also filed for Chapter 11 of the US bankruptcy law and the feeling is that the list could soon be enriched with other crypto protagonists, starting with Genesis and Gemini.
Cryptocurrencies: Pension funds move away from the sector
A bad signal however is coming from institutional investors such as pension funds, who are moving away from cryptocurrencies. Canada’s largest pension institution CPP Investments has given up on evaluating investment opportunities in the sector, according to sources close to the fund. Other funds like the Caisse De Dépôt Et Placement Du Québec and the Ontario Teachers’ Pension Plan have wiped out their investments in crypto companies, after the brunt of holdings in crypto lender Celsius and exchange FTX, both of which have filed for Chapter 11 protection .
According to Stéphane Quellette, Chief Executive Officer of crypto derivatives broker FRNT Financial, for most of these investors, “a clear path towards participation in cryptocurrencies has not been established”. Thus, the moves to exit the crypto environment highlight “the difficulty for these institutions, where the Celsius and FTX failures show unclear metrics for assessing the profitability of crypto firms”.
Bitcoin: Here’s What To Expect Now
So what to expect from Bitcoin in the near future? In the opinion of Edward Moya, an analyst at the Oanda brokerage, until the key data on inflation and interest rates arrive, the virtual currency will remain “stuck in a see-saw around the $17,000 level”. So wait until next week when the Bureau of Labor Statistics releases its November US CPI data, which should maintain the cooling trail it signaled last month. The Federal Reserve will meet on December 13 and 14 , which will probably reduce the interest rate tightening to 50 basis points from 75 in the last four meetings.
“Cryptocurrencies have had no new developments resulting from the FTX crash and this has provided a quiet period,” Moya added. Marcus Sotiriou, an analyst at digital asset broker GlobalBlock, said that Bitcoin held its position at $16,800 this week, despite the S&P 500 falling significantly. This could be a “sign of strength, although technical analysis suggests we may have some downsides” in the short term.