Why is the crypto market down today?
There are other more macro-level factors also leaning on crypto prices besides the implosion of FTX and Alameda. What is clear is that the implosion of FTX and Alameda is having a devastating impact on crypto prices.
Traders on Crypto Twitter say the market is “down really bad” today. The top line in the candlestick chart is nearing (the close), and it appears Bitcoin is down.
altcoins are hardly over.
On Nov. 9, the price of Bitcoin dropped to a new yearly low, reaching $16,661, after having climbed to an all-time high of $69,400 in November 2020 when the bull market first began.
More than $200 billion was wiped from the global cryptocurrency market in the last 48 hours.
The current market bloodbath is primarily due to solvency concerns regarding FTX and the role that Alameda Research, a prop trading firm, may have played in it. There are also rumors that FTX’s balance sheet hole may be as large as $6 billion.
Frank Chaparro believes that FTX’s hole could be as high as $6bn.
Investorsare now taking a risk-off approach to cryptocurrencies after Binance announced that it would not purchase the embattled exchange.
Binance has issued the following statement: In accordance with our whitepaper, we are fully committed to building the world’s leading digital asset exchange. This is an official statement from Binance: We are dedicated to building the world’s best crypto exchange.
Beyond the imploding effect of the FTX and Alameda crypto implosions, there are other more macro-level factors weighing on crypto prices as well.
A bank run and contagion scare the market
The May 2022 Terra bank run and LUNA Classic’s ultimate collapse reverberated through the cryptocurrency market, bringing about the first seven-week losing streak in Bitcoin’s history.
Analysts compare the current FTX bank run to Terra earlier this year, in which investors perceived a large budget hole. They also draw parallels between the two situations. Because of these fears, investors’ concerns about the cryptocurrency industry as a whole are growing.
The threat of regulation, being persistent
The cryptocurrency industry has a long history of regulators not getting along with the cryptocurrency industry because of various misunderstandings or mistrust of the digital assets’ true function.
Due to the absence of a working framework for crypto sector regulation, different countries and states have various conflicting policies regarding what constitutes a legal payment system in cryptocurrencies.
Many analysts believe that the mainstreaming of cryptocurrencies can only happen when a more universally agreed upon and understood set of laws is enacted until now, and this ambiguous situation is holding back growth and innovation.
Investor sentiment is clearly impacting risk assets, including Bitcoin and altcoins. Regulators have yet to announce unfriendly cryptocurrency regulations or an outright ban, but this hasn’t stopped cryptocurrencies from taking a beating on a nearly monthly basis.
Germany has stated that it is investigating Coinbase’s business procedures in light of the FTX fiasco. This may signal that regulators will begin to step up strict enforcement.
Scams and Ponzis led to liquidations and additional losses to investor confidence
Crypto prices crashed throughout 2022 due to scams, Ponzi schemes and sharp market volatility. The bad news and events that compromise market liquidity because of the lack of regulation, the youth of the cryptocurrency industry and the fact that the market is relatively small make for catastrophic outcomes due to the absence of regulation, the youth of the cryptocurrency industry and the fact that the market is relatively small.
With the implosion of Terra’s LUNA and Celsius Network as well as the misuse of leverage and client funds by Three Arrows Capital (3AC), two successive blows were inflicted on asset prices within the crypto market. Bitcoin is currently the biggest asset in the sector by market capitalization, and altcoin prices historically tend to follow the path of Bitcoin’s price.
Terra and LUNA ecosystems collapsed on themselves, resulting in a major Bitcoin price correction. Multiple liquidations occurred within Terra, causing investor sentiment to tank.
In the case of Voyager, 3AC, and Celsius, tens of billions in investor and protocol funds were erased.
What to expect for the next two years, based on the trend of the last seven years.
In the light of FTX’s capital crunch and investors’ worries regarding previous bankruptcies, the downward pressure on crypto prices is driving factors.
Investors, on the other hand, are likely to remain eager for risk and prospective crypto investors may want to wait for signs the U.S. inflation cycle has peaked and for the regulatory environment to become clearer.