FTX’s Bitcoin-exchange chief Sam Bankman-Fried expects rising demand for Bitcoin amid economic instability in Eastern Europe linked to the war in Ukraine and the devaluation of local currencies.
1) Some thoughts on crypto, Ukraine, and stocks
— SBF (@SBF_FTX) February 24, 2022
‘War is, as a rule, bad. What should BTC do here? On one hand, if the world is getting worse, people have less discretionary money. Essentially, selling BTC—along with stocks, etc.—is paying for war. On the other hand, events destabilize the currencies of Eastern European countries and the financial systems of the region as a whole. People may become interested in alternatives. If you were in Ukraine right now, what would you store your money in?’ — he commented.
Bankman-Fried expected a sharper decline in Bitcoin due to the actions of algorithmic traders. He pointed to the increased correlation between digital assets and equities in light of the Fed’s plans to tighten monetary policy. He estimated the corresponding coefficient at 0.8, and the beta at 4 (in other words, a 1% drop in the S&P would imply a 4% drop in Bitcoin).
Under current conditions, this same class of market participants, with the stock market down 4%, expected the digital gold to depreciate by 16%.
Meanwhile, investors focused on fundamentals may buy the dip. Thus Bankman-Fried explained the halt in Bitcoin quotes ‘at the halfway point to daily losses of 8%’.
As another reason, he cited the possible start of a new cycle. Moreover, the FTX CEO did not rule out that all his previous arguments could be invalid, and that the problem lies in deteriorating liquidity. It is for this reason that traders could refrain from buying volatile assets.
‘Anything could happen, and I don’t know what exactly. Most likely we have entered a new regime compared with the previous eighteen months. Time will tell’, — he concluded.
Earlier, in January, Bankman-Fried urged regulators to create a single set of rules for cryptocurrencies.
Earlier, the CEO of FTX said that the cryptocurrency industry needs to address a number of problems to become mainstream. Among the main challenges, he named scalability and regulation.
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