FTX and Alameda’s Ponzi-like trading scheme has faced a heavy blow to the whole crypto market. Many claims that Sam Bankman-fried, the exchange’s founder, secretly transferred $10 billion from FTX to Bankman Fried’s trading company Alameda Research. These funds are taken from the customer’s fund. People claimed that a major portion of that total has disappeared since then. Some sources put the missing amount at about $1.7 billion.
This article will discuss three major developments to keep a close eye on.
According to this week’s statistics, Bitcoin has been showing record-low volatility, giving altcoins an edge to paint some nice technical setups. On the other hand, on-chain data and technical analysis were starting to suggest that Bitcoin was midway through carving out a bottom, and most analysts believed that brighter days were coming.
Fasting forward to the present and the volatility spiking the market received actually turns out to be a black swan event.
As we already know, FTX is broken-down!
Alameda research is broken-down!
BlockFi has stopped the withdrawals, showing dysfunctionality towards “operate as usual,” thereby stopping client withdrawals as allowed under our terms,” which shows that the company is also broken-down.
The contagion is emerging, and the shrapnel from this Krakatoa-level event tends to ripple throughout the crypto ecosystem.
At this time, it’s really hard to do a short-term investment thesis for assets by looking at the chart. The best thing uncertain investors do is either stick to a time-tested plan or simply do nothing. The most likely short-term outcome is volatility, which will stay high. In contrast, cryptocurrency prices will continue to rise for a while.
No trader is comfortable focusing on the potential negative results that lie ahead for cryptocurrency prices and the whole crypto industry. However, it’s the responsibility of almost every investor to think about every possible outcome and have a contingency plan in place.
This way, you don’t freak out when shit hits the fan.
Below are some things you need to keep in mind for the upcoming days.
USDT/USD vs. USDC/USD
It is usually observed that many stablecoins break their peg with the dollar during high volatility events. Of some wild FUD about BTC being hacked, banned, or dying, these stablecoin prices sometimes rise above $1.00 as most traders seek refuge in assets that are fixed to the dollar.
Similarly, during the crypto black swan events, sometimes Tether losses its dollar peg. It occurred many times in history, and usually, once the smoke clears, it restores the 1:1 peg.
On November 9, USDT/USD went below its dollar peg, dipping to as low as $0.97 at just one point, according to the Coinbase and Trading view data. Whereas USDT went below its peak, USD Coin’s value raised incredibly to $1.01.
Though we won’t be going in-depth about the unconfirmed reasons for the dislocation between the two, the unsubstantiated rumours related to Alameda Research and Tether can be easily found on Twitter.
What’s worth noticing here is that panic can easily be created by false information, rumours, and lies. Therefore it doesn’t matter if the rumours about Alameda research/tether are completely wrong.
If the rumours or any news spreads on social media and spooks investors, they will act. In this case, many wills or are in the process of exchanging their USDT for USDC, Bitcoin, or any other stablecoins.
The same scenario happened during the Terra and Celsius implosion. USDC’s price skyrocketed on May 12, from $1.00 to $1.06-$1.19, according to the data from KuCoin and TradingView. On the same day, USDT’s value dropped to $0.98 and $0.94.
When the price is dislocated and spread across exchanges, stablecoin conversions are costly. The experience of swapping from one to the other or from an altcoin to a stablecoin can become unlikely.
The USDT and USDC dollar peg is something that needs consideration in this regard.
BTC price expectation
The sell-off on November 8 finally took BTC’s price out of the 146-day range, which just ranged between $24,500 and $18,600.
This is a significant range break. While considering the technical analysis, failure to regain this range and increasing selling can be seen as the price slice through the volume profile gap for finding support in the $11,000 to $12,000 range.
Quite displeasing? YES, But this just depicts the current reality.
If Bitcoin can reclaim and hold the $18,000 handle, at least the price will be back in its previous range, which would be a great sign.
The Ethereum statistics show the same setup where Ethereum dropped out of a 148-day range between $2,000 and $1,250. However, the price has already reclaimed the previous range.
Most bearish traders have a downside target in the $700 range; however, it’s incredible to see how the price has rebounded for trading back around $1,250.
The market is looking for a stronger footing.
Many big investment groups and crypto-focused companies have exposure to FTX and Alameda research, which also shows these companies now have some holes in their balance sheets.
Companies with exposure to #FTX
-Sequoia Capital – $213.5 million exposure
-Galaxy Digital – $77 million exposure
-Crypto.com – Less than $10 million
-Amber Group – 10% funds
-Kraken – exposure to 9000 FTT
-Multicoin Capital – 10% funds
-Selini Capital – 3% of their funds
— Being Satoshi 🇮🇳 (@BeingSatoshi) November 10, 2022
Some crypto-native companies also hold significant bags of various altcoins and decentralized finance tokens (Defi). For salvaging the current losses, making good on their own loans, and meeting their client obligations, these BTC, altcoins, and DeFi token stashes could find their way to being market sold on spot exchanges.
Most of the altcoins are already going down badly, and some are relatively illiquid, indicating a sharp rise in selling that could put strong downward pressure on prices.
This discussion concludes that buyers should go in-depth into the market and look closely before buying. Also, some majority holders of the token/project remember that FTX’s multi-billion dollar implosion is yet to be fully felt throughout the sector.
Now it’s the time to research and do due diligence before investing in any digital currency.