Is Bitcoin Still Heading Into an Ice Age?

into a winter, but a possible crypto ice age. The data provider reviewed stats from past down turns, finding that Bitcoin, the largest digital currency by market value, could continue declining into year end, and then, of course, a series of previously unthinkable events with news surfacing the crypto's second leading exchange, f t X halted Withdrawal's declare bankruptcy and had its CEO,

Sam Bank and Freed resign. And this sunning downfall sparked a whole new, wide ranging market downturn, with Bitcoin falling below seventeen thousand dollars of coin, down from sixty nine thousand just a year ago. And as the digital assets industry continues to adapt to this new post ft X reality, what will it all mean for bitcoin's value joining us now is Bloomberg Reporter over cariif I think a lot of people are still building and hopeful that this is

sort of a temporary setback. So all that something that you and I have been talking about for a really long time. Actually we talked about it even back in two thousand and eighteen, is the crypto winter, which i'll lot of people are familiar with. But now we have so many events within the crypto space impacting crypto prices, and I want to ask you about what all is going on. It's helping to create this maybe we can call it this crypto ice age. Sure. So, so it's

a confluence of two factors. One is macroeconomic sort of environmental factors, the FED increasing interest rates that pushes investors

away from risk assets like cryptocurrencies. This is what essentially impacted crypto prices earlier this year, and then later this year we just saw a cascade of essentially crypto company bankruptcies where a lot of these companies made risky bets that didn't turn out right in the environment of following crypto prices, and so we saw bankruptcies of companies ranging from hedge fund three years capital to uh lender, Celsius

network to just this month ft X crypto exchange. So just to speak to the crazy nature of the last couple of days, the ft X implosion and everything that's happening in the wake of that, that really is helping to spur this humongous plunge in crypto prices and is helping create this ice age. Right, Absolutely, it's been you know, even people who have been in crypto for all these years, they say that this is sort of the biggest implosion, the biggest scandal in crypto, if you will, that they've

ever seen or experienced. So it just sent shock waves through investors new to crypto as well as long timers who have seen a lot of bad things happen in this industry. But even they are shocked and and just you know, hugely impacted by what happened, dismayed by everything that happened. Yeah, you and I wrote this story that said earlier bitcoin bear markets show that its price might

not have hit bottom. We wrote this a couple of days ago, which in the cryptosphere feels like a hundred years maybe the way things have been developing the last couple of days. But can you talk just a little bit more about how within the cryptosphere, because we don't really have a lot of fundamentals to be looking at

right in terms of prices for different coins. So what traders tend to do is they're looking at charts, they're looking at technical levels, and they're looking at historical data and what's happened during past draw downs, right to sort of come to these conclusions about whether or not the worst is behind us, right, And basically what happens during bear markets is that traders rush out of a lot of this so called alt coins, you know, coins that are not Bitcoin, and either get out of the market

completely or seek safety in Bitcoin. And so it's very helpful to see sort of what happens with bitcoin in the bear market it to just figure out have we

reached bottom or not yet. And crypto Compare did just that, and they looked at the downturns that started in thirteen and eighteen or seventy late and basically what they found was that in both of these downturns, bitcoins price dropped by more than eight percent, and sort of before f t X collapsed, what crypto Compare found was that, you know, so far this crypto winter bitcoin is down by seventy something percent, and so crypto compare argued that that means

that sort of it's not over yet. We could see other declines, particularly if they're triggered by sort of major macro events. And of course, since that report came out, ft X crypto Exchange for bankruptcy, so that definitely triggered

further declines in bitcoin prices. And I want to go back to a point that you were making about institutions and how they've been involved, because a big narrative that you and I have been writing about over the last maybe two years or so is that institutions were stepping in and becoming more interested in the crypto space, especially as prices were skyrocketing in But can you talk a bit more about that sort of hit to reputation or hit to trust that we're going through right now and

experiencing right now, and what it means for institutional investments and how much more hesitant maybe they're telling you they are about being in the space or being involved in this space in any way. So I think it's really crucial what what you mentioned there in terms of institutions losing trust and crypto. I think that has happened, especially over the last week and a half when ft x um went bally up up, potentially you know, misusing a

customer funds. Basically, ft X was the darling of Wall Street because it's founder, Sam bank Manfried he worked as a trader on James Street, so he spoke Wall Streets language. People felt very comfortable with him, you know, being on this exchange. And a lot of institutions held accounts on FTX crypto exchange, and now their money is stuck on the exchange and they don't know when or whether they

will get this money back. So a lot of large institutional investors got hurt by simply, you know, having had a relationship with ft X. But more importantly, I think a lot of institutions are becoming very much more cautious about stepping into crypto. It's been pretty much prices have been moving down, down, down, and it's not clear that we are at the bottom yet, and it's very risky from many institutions standpoint to step into the space when we don't even have a full picture of the fallout

from ftx is bankruptcy. So I think institutions are increasingly doing more due diligence or hoping to start to do that more, you know, after seeing even sort of well regarded firms like FTX going bankrupt and apparently sort of not maybe doing everything the way they were supposed to. And so most people in crypto who interact with the institutions say that they expect that the institutional investors will take a breather and kind of step back from investing

in crypto for for a while. And the other side of this, obviously is retail investors. And you and I wrote about in the story that we were just talking about how retail investors really, even before the ft X implosion and some of the other events that we've seen happen over the last couple of days, retail investors really were scaling back their involvement in the space, whereas in you had a lot of retail investors being very excited by the price returns that we were seeing in the

crypto space, and they were stepping in and spending stimulus checks. There's STiMi checks some of them on cryptocurrencies and other sort of speculative and risky bets. So how important is the retail investor to the space, And this is a question I also have been asking a lot of people I speak with their involvement is so pertinent to this space, right and and a lot of them have been getting hurt, not just by the implosions earlier in the year, but

also with what's going on with FTX. Absolutely, I mean in general, during crypto bear markets, as we both know, you know, retail investors pull back, pull out of the market. That's why crypto exchanges generally see much lower revenues, if if any revenues at all, or profits rather from you know, on the years of the bear markets, retail investors sort of stay on the sidelines. They don't want to trade very much. What we could see from ftxcess demises is

so many retail investors got hurt. A lot of them have lost trust in crypto and sort of crypto related infrastructure, and so they might stay on the sidelines for a while. But again, I feel like for both types of investors, retail and institutional, you know, if there is some sort of price action where prices actually start going up again, you know, I suspect that we'll see both of those

types of investors jumping right back in. Because we've had catastrophists in crypto before back inten of course, crypto was much smaller back then, the world's biggest bitcoin exchange mogs. You know, when bankrupt and it sends shock waves throughout the crypto in the street, But you know, some months later people got back into crypto, or new people came into crypto, and this was forgotten. And I suspect the

same will happen here as well. Up next, more with Bloomberg reporter Olga Karif on whether bitcoins winter might turn into a crypto ice age. Just to go back to your point about all coins. You mentioned all coins earlier, and how much more they tend to get hit during these draw downs. This is something that we tend to see happen right where smaller coins are less well known coins or coins basically that just aren't Bitcoin, tend to suffer to a greater degree than Bitcoin itself does. Absolutely,

and and I think that makes sense. They tend to be riskier to begin with because fewer people hold them, so price moves can be more severe in one direction or another. During bullmarkets, Uh, you know, you can make more money potentially in olt coins, but of course during bear markets, a lot of the coins actually go into the zombie mode where they're not trading at all. I mean, thousands of coins became zombies this year, along actually the

most coins ever. Yeah, you had a great story on this, thank you, and so so I think people perceive all of crypto to be very risky right now, and especially out coins, and maybe we can end possibly on a more hopeful note. But what the crypto people and people who are involved in this space, what do they have to tell you when you are asking them about the future and what's next. As you said, we still have yet to see everything that happens in the wake of

the FTX fall up. But once we passed all of that, what are people within the space expecting to see? Well, I think on the most hopeful note, a lot of people say that all of the catastrophes that happen this year basically are gonna possibly speed up additional laws and regulations that will make it completely clear what you can and cannot do in crypto, or will make it more

clear than it is today. Rather and essentially additional regulation will help legitimize this industry, you know, in the coming months, once it's this groundwork is laid out, and you know, a lot of people are still building. They believe that maybe uh ftxcess bankruptcy will push more people to look more at decentralized finance applications, which allow people to trade, borrow and land without intermediaries with out centralized parties. I think a lot of people are still building and hopeful

that this is sort of a temporary setback. But again the question is how temporary it could be a while. Thank you so much Aga for joining us and for all your insights, and also thank you so much for all the great reporting you've been doing on crypto markets and everything that's been going on with the FTX fallout. Right back at you. You've you've been doing amazing stories and and I got a chance to do a few of the stories together with you, which was really fun,

and and thank you so much. I'm blushed like anybody who can't see us, which is everybody. Thank you, Thank you. You can find more of Olga's reporting on the Bloomberg Terminal and on Bloomberg dot com, and for more, be sure to check out our twice weekly newsletter, Bloomberg Crypto. This is Bloomberg Crypto, a dearly podcast from Bloomberg and I Heart Radio For more shows from I Heart Radio, visit the I Heart Radio app, Apple Podcasts, or wherever

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