Bitcoin to lose a quarter of its value in weeks, analyst warns

Bitcoin could fall to $13,000 in the coming weeks, claims an analyst at JP Morgan, which expects investors to pull their money out of cryptocurrency markets amid the fallout from the woes of FTX, the teetering crypto exchange.

Having dived earlier in the week, the value of bitcoin jumped 11 per cent to $17,400 yesterday — but Nikolaos Panigirtzoglou, an alternatives and digital assets strategist at JP Morgan, thinks the price could yet fall 25 per cent.

If it hit $13,000, bitcoin would be at its lowest level since October 2020, weeks before the discovery of a Covid vaccine led to a surge in the value of risk assets, digital currencies among them.

Bitcoin embarked on an extraordinary rally from late 2020 and through 2021, peaking at a cent shy of $69,000 at this time last year. However, it has declined sharply in 2022, losing more than two thirds of its peak value.

Along with other cryptocurrencies, bitcoin has come under further pressure this week as FTX, which used to regularly handle more than $1 billion of digital currency transactions each day, battles to stay afloat.

“Given the size and interlinkages of FTX with other entities in the crypto ecosystem, it looks likely that a new cascade of margin calls, deleveraging and crypto company/platform failures is starting,” Panigirtzoglou wrote in a note to clients.

That “deleveraging cycle”, he added, could last “several weeks”.

In trying to figure out where the buck might stop, the analyst noted that bitcoin rarely falls below its production price. At the moment, it costs about $15,000 — mostly for electricity — to “mine” a single coin, although Panigirtzoglou thinks that will drop back to $13,000, where it was over summer.

Making this current sell-off “more problematic” is the inability or unwillingness of other crypto exchanges to step in and save FTX. Binance, the world’s largest exchange, backed out of a deal this week.

Panigirtzoglou said that the sudden demise of FTX, which was considered to be in robust shape only a few months ago, “creates a confidence crisis and reduces the appetite of other crypto companies to come to the rescue”.