Turning November: Bitcoin’s ATH anniversary and the FTX collapse

If October has already earned the label “month of growth,” November has yet to decide what kind of news to bring to the crypto market. On November 10, 2021, the price of the first cryptocurrency hit a historic high at $69,000, and the following year—on November 11—FTX announced bankruptcy. We examine how these two polar opposite events affected the industry.

On the road to ATH

The maximum price of Bitcoin varies by exchange, but in the community ATH is commonly taken to be $69,000.

The rally was driven mainly by record-low interest rates due to the COVID-19 pandemic. At the time, the first cryptocurrency largely followed the S&P 500, which was at the peak of a decade-long bull run.

At the same time, numerous startups, new indices and innovative technologies such as zero-knowledge proofs began to appear.

However, part of the community grew disappointed that the decentralized Bitcoin, long seen as a hedge against inflation, began to correlate strongly with the stock market — implying the asset’s dependence on macroeconomic factors.

“Looking back, the price itself hardly matters. What mattered then was that Bitcoin was rising. It was a rally, a lift fostered by collective belief. Many sincerely believed that Bitcoin would not stop and could reach $100,000 if we all believed hard enough,” said Daniel Kun, deputy editor-in-chief of Consensus Magazine.

The journalist called November 2021 a time of “irrational exuberance,” alluding to Nobel laureate Robert Shiller’s eponymous book. There were few real use cases for the cryptocurrency, but the system held a vast array of levers for speculators, he added.

Today Bitcoin has somewhat decoupled from the global economy. According to The Block Research, the 30-day moving average of the correlation coefficient with traditional US stock market indices—the S&P 500 and Nasdaq—has reached negative values.

The current rally of the first cryptocurrency is being powered by expectations of approval of a spot Bitcoin-ETF in the United States. Market participants anticipate a large inflow of institutional capital, which could supply additional momentum.

As of writing, digital gold sits at almost half its peak — $36,904. At the same time, since the start of the year the asset’s price has risen more than 100%.

But over the two years since the ATH, the token has endured far harsher times, slipping in November 2022 to a local low below $16,000.

The industry’s biggest scandal

On November 11, 2022, FTX and Alameda Reserach of Sam Bankman-Fried kicked off a deep crypto winter by filing for bankruptcy. Bitcoin then posted its worst performance, extending the negative momentum from earlier major collapses—the Terra ecosystem and the hedge fund Three Arrows Capital.

However, digital gold did not take long to recover. By the end of January 2023, trading activity for the coin had recovered to pre-crash levels.

“Bitcoin proved its resilience, especially after the FTX collapse. It did not fall to zero, showing that this was not merely some fraudulent network. It is not going anywhere,” noted Jason Fang, managing partner at Sora Ventures.

In his view, Bitcoin’s price at $200,000–$400,000 would be driven not only by market speculation but also by the asset’s usefulness.

While digital gold was trading down in 2023, U.S. prosecutors were assembling evidence against Bankman-Fried. In total, authorities charged the founder of FTX with seven criminal counts. He pleaded not guilty to none of the charges.

Autumn brought relatively swift court hearings, with former CTO Nishad Singh and former Alameda CEO Caroline Ellison testifying against their boss.

Ultimately, a jury found Bankman-Fried guilty on all counts; the final sentence will be handed down on 28 March 2024. Notably, the verdict was also delivered in November.

Prosecutor Damian Williams said that the founder of FTX “committed one of the largest financial frauds in American history.”

Separately, the exchange’s new management is preparing a possible restructuring plan. Yet the main story that taught the market and its participants a great deal — it seems — has run its course.

“[The guilty verdict] closes a very dark chapter in the crypto industry, and makes clear that [Bankman-Fried] was ultimately simply a fraud,” noted Yat Siu, co-founder of Animoca Brands.

Earlier, leading analysts pointed to precursors for a move by Bitcoin toward $40,000, noting, in particular, the rise in open interest in futures based on digital gold.

In October, technical analyst and head of Factor LLC Peter Brandt urged traders to prepare for a “brutal bout”.