Sunday, February 5, 2023
HomeMarketBitcoin Holds at $17,000. Pension Funds Have a Grim Message for Crypto’s...

Bitcoin Holds at $17,000. Pension Funds Have a Grim Message for Crypto’s Future.

Bitcoin prices have plunged over the past month, extending declines in an already-grim year, with the bankruptcy of FTX dragging on cryptos.

- Advertisement -


Dan Kitwood/Getty Images

Bitcoin
and other cryptocurrencies rose Friday as digital assets traded in step with stocks, which have gained amid an improvement in risk sentiment this week.

But crypto continues to face existential risks after a string of high-profile failures this year have dented institutional interest in the space.

The price of
Bitcoin
has advanced 2% over the past 24 hours to $17,200, trading near the recent high-water mark for the largest digital asset, which has still fallen by some 20% in a month following the shock bankruptcy of crypto exchange FTX on Nov. 11. Bitcoin continues to change hands at around a quarter of its late-2021 all-time high, but remains off its two-year lows hit in recent weeks near $15,500.

“Until we get beyond some key pricing data and the [Federal Reserve] decision, Bitcoin seems stuck in a seesaw around the $17,000 level,” said Edward Moya, an analyst at broker Oanda. “Cryptos haven’t had any fresh developments stemming from the FTX collapse and that has provided a quiet period.”

Indeed, Bitcoin and its peers remain largely correlated to the stock market, swinging in step with the
Dow Jones Industrial Average
and
S&P 500
— as it has for much of 2022 amid a tough macro backdrop of high inflation and rising interest rates. In a beaten-down crypto market post-FTX collapse this link has been a double-edged sword, with tokens following stocks higher while being equally vulnerable to price breakdowns when equities slip.

Investor sentiment has improved at the end of the week, with the next major catalysts for markets likely to be inflation data from the producer-price index due Friday, before the consumer-price index next week. But the highlight will be the Federal Reserve’s monetary policy decision following its Dec. 13-14 meeting, with the central bank widely expected to slow down its pace of painful interest-rate hikes.

Until then, traders should expect cryptos to keep moving in tandem with stocks, though the technical outlook for Bitcoin suggests some weakness.

“Bitcoin has held $16,800 despite the S&P 500 dropping significantly this week, which could be a sign of strength in the short term. However, technical analysis suggests we could have some downside,” said Marcus Sotiriou, an analyst at digital asset broker GlobalBlock. 

But there are bigger fish to fry than the short-term outlook. 

FTX’s meltdown, which has slammed crypto prices and raised fears of a tough regulatory crackdown, also appears to be scaring away institutional investors. Groups like banks and pension funds have long been courted by the world of crypto, with their participation in the space seen as a key requirement for upward mobility in token prices and the wider adoption of digital assets.

Canada’s biggest pension fund, CPP Investments, has ditched efforts to study investment opportunities in crypto, Reuters reported this week, citing two anonymous sources. That souring on digital assets follows similarly downbeat experiences from other funds, namely the Caisse De Dépôt Et Placement Du Québec (CDPQ) and Ontario Teachers’ Pension Plan, marking their own investments in crypto firms down to zero. CDPQ and Ontario Teachers’ were investors in crypto lender Celsius and exchange FTX, respectively, both of which have filed for bankruptcy this year.

These moves “highlight the difficulty for incumbent institutions to participate in crypto. The Celsius and FTX bankruptcies also showcase the unclear metrics for assessing the viability of crypto businesses,” said Stéphane Ouellette, the CEO of FRNT Financial, a crypto derivatives broker. “For most incumbent financial institutions, a clear pathway towards participation in crypto has not been established, despite some inroads by traditional finance firms into the Bitcoin and crypto space.”

Beyond Bitcoin,
Ether,
the second-largest crypto, rose 4% to above $1,275. Smaller tokens or altcoins were also buoyant, with
Cardano
and
Polygon
lifting 1% and 3%, respectively. Memecoins were also in the green, with
Dogecoin
and
Shiba Inu
both up 2%.

Write to Jack Denton at jack.denton@barrons.com

Credit: marketwatch.com

RELATED ARTICLES
- Advertisment -

Most Popular