FTX Fiasco Pushes Bitcoin Price Lower on Continued Fears of Contagion

Cryptocurrencies were mostly lower as the risk of further contagion continues to weigh on investor sentiment.

Bitcoin dropped as much as 1.4% to $16,882 on Monday as the fallout from FTX collapse continues. (AFP)

Cryptocurrencies were mostly lower as the risk of further contagion continues to weigh on investor sentiment a month after Sam Bankman-Fried's FTX exchange sought bankruptcy protection.

Bitcoin dropped as much as 1.4% to $16,882 on Monday before paring losses. Ether sank modestly as well, while altcoins like Avalanche and Dogecoin posted more significant declines.

The insolvency of one of crypto's most established firms pushed down prices, already in a months-long slide. At the start of the fourth quarter, Bitcoin traded close to $20,000, but over the past month, the token has hovered around $16,500, failing to break above $17,400. Bitcoin is down 63% this year.

“I would expect us to continue to stay range-bound until the new year,” wrote Aya Kantorovich, former head of institutional coverage at FalconX.

Instead of expanding crypto portfolios, clients have unwound and hedged their crypto exposures, which Kantorovich said has pushed down open interest in Bitcoin and Ethereum. Bitcoin dropped 16% in November, its largest monthly decline since June.

Kantorovich added that she expects funds to “re-deploy into the space in January,” and wrote that crypto markets may be hitting a bottom.

Crypto trading firm Cumberland also said it does not “expect this paradigm to last,” given consolidating price action.