Nikolaos Panigirtzoglou

After this week’s collapse of FTX, which was one the largest bitcoin exchanges by volume often handling over $1 billion (£850 million) in daily transactions, the cryptocurrency markets have been in shock with large market swings day after day.

Nikolaos Panigirtzoglou, an alternatives and digital assets strategist at JP Morgan, claimed the value of Bitcoin could drop further in the coming weeks as expectations that investors will pull their money out of cryptocurrency markets rise, The Times reports.

A drop to $13k (£11k) would take bitcoin back to its lowest trading level since October 2020.

During the pandemic, Bitcoin saw an extraordinary rally from the second half of 2020 through all of 2021. It peaked at just under $69k (£58k) at around this time a year ago. However, the value of Bitcoin plunged at the start of 2022, and has now lost more than two thirds of its peak value.

Mr Panigirtzoglou said: “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.” 

He expects the deleveraging cycle could last weeks.

Binance - the largest exchange by volume, processing over $28bn (£23bn) in daily transactions - had initially said it would buy the failing FTX, but later reversed its stance citing “corporate due diligence, as well as the latest news reports regarding mishandled customer funds and alleged US agency investigations”.

The sudden and unexpected demise of FTX has created “a confidence crisis and reduces the appetite of other crypto companies to come to the rescue,” Panigirtzouglou said.