It’s getting ugly out there. On Friday, Bitcoin’s latest swoon saw it fall to $82,000, marking a drop of around 32% from its all-time high of $126,000. That high came just last month, but it now feels like a distant memory as exchanges liquidate over-leveraged traders, and retail buyers curse the day a cousin gave them that tip about Bonk coin. So just how much lower will prices drop?
There’s a good chance that $82,000 is not the bottom. While prices have rallied in the last few days, with Bitcoin trading around $86,000 on Monday morning, it’s easy to envision scenarios where it drops to $70,000 or lower. A jolt of dour macro-economic news or a major scandal (more on that in a second), and we could be right back in Crypto Winter.
As for how we got here, it’s pretty clear that Oct. 10 was the catalyst for the current malaise. That was the day that saw around $19 billion of forced liquidations—underscoring the perils that go with allowing crypto cowboys to leverage their positions by as much as 100x. That wipeout, in turn, spooked the many institutional investors that rushed into the sector amid the euphoria that came with President Donald Trump’s favorable regulatory policies. It turned out that it was just as easy for them to rush out again.
The crypto industry’s painful financial month, one of its worst on record, is also bad for its already-tarnished reputation. Longtime haters will be keen to jump in with the familiar narrative that crypto is little more than a nest of fools and swindlers, and that it’s the Sam Bankman-Fried era all over again. That view, however, is mistaken.
The crypto collapse of 2022, which saw Bitcoin fall as low as $16,000, was indeed touched off by a wave of fraud. The villains included not only Bankman-Fried, but figures like stablecoin scammer Do Kwon and Alex Mashinsky, who ran a “trusted” centralized platform for crypto deposits. Conversely, there is no major scandal driving crypto’s current woes—though we could, of course, see some nasty stuff get exposed if prices keep falling.
All of this, though, can make it easy to overlook just how much bigger the crypto industry is today, and how much its underlying infrastructure has matured. Sure, some institutional investors have gotten cold feet about buying tokens, but there are a lot of very big names—think BlackRock and now Citadel Securities—which have made clear they are in for the long haul. The fact of the matter is that blockchain technology is simply superior to the legacy software that most of the financial system relies on, and Wall Street is ready for an upgrade.
This process is just beginning, and it will ensure ongoing adoption of marquee crypto projects like Ethereum and Solana. It also won’t be long until DeFi systems become interwoven with the broader financial system. As my lawyer pal Marvin Ammori noted, the daily trading volume on the DeFi exchange Uniswap is equal to a month of trading volume on Kalshi, which is being treated as the hottest thing in town.
The bottom line here is that crypto is taking its lumps right now, but things are not as bad as they seem. The downturn will serve to wash some of the worst grifters out of the industry, and force those left to step up and prove they are building something of value. This will happen but it could be a while before we see Bitcoin at $126,000 again.
Jeff John Roberts
jeff.roberts@fortune.com
@jeffjohnroberts
DECENTRALIZED NEWS
Another TradFi convert: Citadel Securities, the market making giant owned by mega-billionaire Ken Griffin, is investing $200 million into Kraken. The deal suggests Citadel, which had previously avoided crypto, sees a future in tokenization. (Fortune)
SPACs smacked: A bid by Pomp to take his DAT public through a reverse merger got rebuffed when the partner vehicle called off the deal on the grounds it was bad for shareholders. Other would-be crypto SPACs are also facing skepticism—a far cry from 2021 when the gimmick was widely used to enrich insiders at the expense of retail investors. (Bloomberg)
Jamie debanks Jack: Strike CEO Jack Mallers complained on Twitter that JPMorgan Chase terminated his accounts over unspecified “concerning activity,” leading crypto figures Bo Hines to complain that the outspoken Bitcoin maxi had been debanked. (Decrypt)
Dirty money bonanza: A major global news investigation found at least $28 billion worth of criminal funds from pig butchers, North Korean hackers and others have flowed into Binance, OKX and other exchanges in the last two years, in part from ask-no-question storefronts. (New York Times)
DePIN drone network: The sector known as decentralized physical infrastructure has been in the dog house since the Helium debacle. Now a drone-tracking startup wants to build out its network by selling $949 sensors and paying out a new type of token for contributing to its network. Sure, but why not just use stablecoins instead? (Fortune)
MAIN CHARACTER OF THE WEEK
Former JPM exec and noted ‘permabull’ Tom Lee takes the main character crown this week for his bullish or perhaps delusional assurances that everything is great, even as his leading Ethereum DAT is badly underwater. Points for staying on message, Tom.
MEME O' THE MOMENT
The timeline is suddenly full of McDonald’s memes—a mainstay of bear markets as crypto bros joke about being so ruined they have to sling fries.
