Cooling US inflation may not stop bitcoin from sliding to $10,000. here’s why

US inflation cooled in December as expected, while in the crypto space the fallout from the bankruptcy of crypto exchange FTX continues. With all that going on, I met Joel Kruger, strategist at LMAX Group, who thinks bitcoin BTCUSD,
+7.73%
may still slip to $10,000, but could hit $50,000 by the end of the year.

Bitcoin in 2023

US inflation slowed again in December. Cost of life fell 0.1% in December, posting the first drop in two and a half years. That, combined with lower-than-expected inflation numbers in previous months, gave Wall Street hope that the Federal Reserve could soon end its interest rate hikes without sending the economy into recession.

Lower inflation, falling Treasury yields since last November and low unemployment helped risky asset prices get a strong start to the year, although the Fed signaled its intention to hike its rate several times director. This year. The Nasdaq Composite has gained more than 5% since the start of the year and bitcoin has risen more than 9% over the same period.

Yet for crypto, the worst may not yet be over as contagion from the bankruptcy of crypto exchange FTX continues to spread, analysts said.

Short-term technical analysis points to potential further declines in bitcoin prices, before bottoming out, according to LMAX’s Kruger. Bitcoin fell below $17,600 in November, setting the stage for the next slide to $10,000, Kruger noted.

A combination of the risky macro environment, greater contagion from the FTX meltdown and worries about a regulatory crackdown could all contribute to the next round of downside pressure, Kruger said. Still, a dip below $10,000 is likely to be short-lived, Kruger noted. Once the rally in risky asset prices is triggered, bitcoin could rally above $50,000 by the end of the year, Kruger said.

Stefan Rust, CEO of Laguna Labs, echoed this point. “I think going into the summer, once we start to see interest rate flattening, we’ll see a recovery coming,” Rust said.

“I think we’ll learn to live with 5.5% interest from the Fed over the next two months. And once we hit that plateau and the guessing game is over, we’ll start to recover,” according to Rust.

SBF and FTX

Meanwhile, Sam Bankman-Fried, co-founder and former chief executive of FTX, is back online, reigniting his defense via a new public forum, while under house arrest at his parents’ home in California.

Bankman-Fried on Thursday launched a channel on SubStack, a platform that supports subscription newsletters. In a blog titled “FTX Pre-Mortem Overview” on Thursday, Bankman-Fried wrote that “I didn’t steal funds,” reiterating his earlier points while posting more details. I have write more about it here.

Meanwhile, more progress is being made on FTX’s bankruptcy case. The company has recovered more than $5 billion in assets, including cash, liquid cryptocurrencies and liquid investment securities, Andy Dietderich, an attorney for FTX, told a Delaware judge on Wednesday. It’s unclear what will happen to the $5 billion or financial assets he recovers in the future.

To see: FTX Says It Has Recovered $5 Billion in Assets as Beleaguered Crypto Giant Navigates Bankruptcy Process

It’s also unclear how much client funds are missing, according to Dietderich. The US Commodities Futures Trading Commission put the number at more than $8 billion, according to a Reuters report.

Plus, billionaire investor Peter Thiel, NFL quarterback Tom Brady, and investor and TV personality Kevin O’Leary were among the shareholders named in a recent bankruptcy court document filed in connection with FTX.

This is the first time that Peter Thiel has been publicly linked to the crypto exchange. His family trust office Rivendell Trust and his venture capital arm Thiel Capital were both listed in the filing as 2021-015 Investments LL, which received 245,000 shares of West Realm Shires Inc., a subsidiary of FTX, and a combined value of 57,230 from Commerce FTX.

In other FTX-related news, a federal judge terminated the naming rights agreement between the crypto exchange and Miami-Dade County on Wednesday. This means the Miami Heat basketball team arena can now officially drop FTX from its name. Discover Anushree Dave cover here.

DCG vs Gemini

Gemini crypto exchange co-founder Cameron Winklevoss on Tuesday called for deletion of Digital Currency Group chief executive Barry Silbert amid tensions between the two companies following the collapse of FTX.

Some users of Gemini’s Earn program, who lent their crypto through DCG subsidiary Genesis to earn interest, were unable to access a total of more than $900 million in funds, according to multiple news outlets. The Genesis lending arm has ceased redemptions since November as contagion from FTX’s bankruptcy spread.

Winklevoss said Gemini and its more than 340,000 Earn users were “scammed” by Genesis and DCG, in a letter to DCG’s board posted on Twitter on Tuesday.

In response, a DCG spokesperson wrote to MarketWatch that “this is another desperate and unconstructive publicity stunt by Cameron Winklevoss to deflect blame from himself and Gemini, who are solely responsible for the operation of Gemini Earn and the marketing of the program to its customers”.

Crypto at a Glance

Bitcoin prices have risen 8% over the past week and were trading at around $18,771 on Thursday, according to data from CoinDesk.

Ether ETHUSD,
+6.43%
rose 12% over the same period to around $1,429, according to data from CoinDesk.

The biggest winners	Price	% return over 7 days
Lido CAD	$1.94	41
Aptos	$5.19	35.8
Zilliqa	$0.02	35.6
ImmutableX	$0.53	29
avalanche	$15.2	26.1
		Source: CoinGecko as of January 12

The biggest declines	Price	% return over 7 days
Nexo	$0.71	-3.7
Houbi	$5.04	-3.4
Toncoin	$2.17	-3.2
S.V. Bitcoin	$42.23	-2
LEO token	$3.45	-1.9
		Source: CoinGecko as of January 12

Crypto companies, funds

Coinbase Global Inc. COIN Shares,
+6.76%
rose 34.6% for the week to around $45.09. MicroStrategy Inc. MSTR,
+7.93%
is up 29%, to $201.43, so far on the week.

Crypto mining company Riot Blockchain Inc. RIOT,
+13.69%
jumped 38% to $5.80 on Thursday. Shares of rival Marathon Digital Holdings Inc. MARA,
+28.58%
rose nearly 55% to $6.04 over the past week. Ebang International Holdings Inc.EBON,
-0.52%
rose 98% over the past week and was trading at $7.5.

Overstock.com Inc. shares OSTK,
+2.42%
were trading down 16%, to $20.78, during the week.

Shares of Block Inc. SQ,
+0.27%,
formerly known as Square, posted a 9.9% gain, to $71.19 for the week so far. Tesla Inc. shares TSLA,
-0.15%
rose 9.4% to $120.80.

PayPal Holdings Inc. PYPL,
+1.57%
rose 4.4% over the week, to trade at around $79.54. Nvidia Corp. NVDA,
+2.99%
rose 15.3% to $164.50 last week.

Advanced Micro Devices Inc. shares AMD,
+2.55%
got 14% to $71.06 for the week.

Among crypto funds, ProShares Bitcoin Strategy BITO,
+7.95%
added 12.7% to $11.89 on Thursday, while its counterpart Short Bitcoin Strategy ETF BITI,
-7.98%
fell 11.4% to $34.78. Valkyrie Bitcoin BTF ETF Strategy,
+7.62%
advanced nearly 13% to $7.51, while VanEck Bitcoin Strategy ETF XBTF,
+7.70%
rose 7.3% to $18.53.

Grayscale Bitcoin Trust GBTC,
+10.05%
gained more than 27% to $10.54.

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