Will FTX Flip Into One other Terra Debacle?

This weekly piece of cryptocurrency worth evaluation and thought management is dropped at you by the knowledgeable workforce at CEX.IO, your crypto information since 2013. At CEX.IO, we’re dedicated to offering the newest worth updates and considerate breakdowns to assist our customers take advantage of knowledgeable choices alongside their crypto journeys. 

This week’s replace examines the continued market crash attributable to the FTX turmoil. 

Following Binance CEO, Chanpeng Zhao’s tweet on November 6 about liquidating all their FTT holdings, rumors went viral concerning the doable insolvency of the FTX change. The value of FTT, the native token of FTX, dropped by over 90% since that day.    

The collapse of the FTT token took the whole crypto market down with it. The value of Bitcoin fell from $21,000 to a low of $16,000 on November 9 – a brand new low from the June 18 backside at $17,600.

However, Solana, a significant blockchain mission intently associated to FTX and its proprietor, Sam Bankman-Fried, additionally noticed its native forex, SOL, drop by over 65%.        

In our final Crypto Ecosystem Replace, we stipulated that Bitcoin wants to interrupt and keep above its 100-day easy transferring common to start out a sustained uptrend that might additionally encourage altcoins to rally greater. Though the value of Bitcoin did break and shut above this resistance line on November 4, the crash on November 8 took it again down under. 

So is the crypto market headed for brand spanking new troubles and decrease lows contemplating that it misplaced the momentum it has gained for the reason that October 13 reversal? 

Learn alongside for in-depth breakdowns and revel in opinions of correlated markets as we attempt to climate this storm collectively.

What occurred to FTX?

In keeping with Lucas Nuzzi, the pinnacle of R&D at CoinMetrics, Alameda Analysis may need gone bankrupt quickly after Terra’s collapse, together with distinguished crypto corporations like Three Arrows Capital and Voyager. Alameda Analysis is the buying and selling agency of FTX, which based on Nuzzi, was rescued by FTX again on September 28. 

Nuzzi rested his argument on the truth that 173 million FTT tokens price over $4 billion turned energetic on-chain that day, which he exhibited in a Twitter thread. Within the thread, he additional demonstrated that each one these 173 million FTT tokens exchanged fingers inside just one transaction, the place the sender deal with belonged to a contract from the FTT ICO and the recipient deal with belonged to Alameda Analysis. So in different phrases, FTX injected into Alameda with over $4 billion price of money.   

Contemplating this substantial outflow from FTX, the Alameda bailout probably put a dent within the FTX steadiness sheet to the purpose the place it was now not solvent.

Nuzzi additional speculated that the parents from Binance heard about this association between FTX and Alameda and intentionally began tanking the FTT markets to power FTX right into a liquidity crunch.

Then, two days later, it appeared Binance was in a position to come to the rescue at an enormous low cost after Sam Bankman-Fried introduced that FTX’s non-U.S. property could be offered to Binance.  

Nevertheless, proper on the following day, on November 10, Binance declared that it’s going to not pursue the potential acquisition of FTX on account of company due diligence in addition to the newest information experiences relating to mishandled buyer funds and alleged U.S. company investigations. 

The backing out of Binance from the FTX deal has introduced an extra wave of promoting stress available on the market, creating an additional 10% loss on common in all main cryptocurrencies.

So will the FTX turmoil create one other collapse within the crypto market like within the Terra meltdown? 

It’s clearly tough to say. Nevertheless, the Terra scenario was exacerbated because of the worth of its stablecoin, UST, and its platform token, LUNA, being decided by algorithms, which created a vicious loophole throughout a market meltdown. For the reason that worth of LUNA depended completely on UST, as soon as UST collapsed, there was no worth left for LUNA. 

As a result of the worth of the FTT token is decided manually by the market, it’s unlikely to face a demise like that of LUNA.  

May Solana be the following domino?

Sam Bankman-Fried has been the primary supporter and financier of the Solana mission. Attributable to this, the turbulence surrounding the FTX change subsequently splattered into Solana. 

Solana’s native token, SOL, skilled a a lot bigger sell-off on November 8 and 9 in comparison with the remainder of the market. It dropped from $37 on November 6 to a low of $12.5 on November 9 – a whopping 65% drop in a matter of three days (see the chart under).    

Solana’s collapse within the wake of the FTX turmoil.

So as to add salt to harm, round 70 million SOL tokens will probably be unlocked this week, based on Solana Compass, which constitutes 13% of the full provide and thus might set off additional draw back within the worth of SOL. 

As a matter of truth, the present worth is sitting on very vital long-term assist. If the $15 assist degree is misplaced on a weekly shut, it could possibly be a freefall for Solana right down to the $5 degree (see the chart under).  

Weekly Solana chart with the $18.50 and $5 support levels

Weekly Solana chart with the $18.50 and $5 assist ranges. 

Bitcoin is on life assist

The latest worth rally from $18,000 to $21,500 had planted hopes in the whole crypto marketplace for Bitcoin to lastly begin a sustained uptrend towards the $29,000 main resistance (2021 bull market assist). 

When Bitcoin broke and closed above the 100-day easy transferring common (SMA) on Friday, November 4, many took this because the potential sign for a long-awaited bull market. 

Nevertheless, Friday’s transfer from $20,000 to $21,500 ended up being a bull entice when the whole transfer was negated by the crash on November 8 (see the charts under).

Bitcoin/U.S. dollar candlestick chart between November 4 and 8

Bitcoin/U.S. greenback candlestick chart between November 4 and eight. Supply: Tradingview.

Daily Bitcoin/U.S. dollar chart with the 100-day SMA resistance line

Each day Bitcoin/U.S. greenback chart with the 100-day SMA resistance line. 

Within the wake of the FTX chaos, the value of Bitcoin dropped as a lot as 25% by November 9, creating a good cheaper price than the June low at $16,000.

Bitcoin/U.S. dollar chart with the price breaking down the horizontal channel

Bitcoin/U.S. greenback chart with the value breaking down the horizontal channel.

If the November 9 candle closes the day under the horizontal channel that Bitcoin has adopted for the reason that June backside (circled in orange within the chart above), considerably decrease ranges could possibly be on the horizon. The subsequent transfer of the S&P 500 inventory index this week might shed some mild on whether or not we’ll go a lot decrease or not.   

S&P 500 could be very vital this week 

Going ahead, the S&P 500 inventory index, the asset class to which Bitcoin has been most intently correlated, could possibly be very vital for the path of Bitcoin. 

The index is presently struggling at a significant resistance, which is the rising channel resistance that it broke down from final summer season (see the chart under). 

S&P 500 index price chart with the rising channel resistance

S&P 500 index worth chart with the rising channel resistance.

If, following the U.S. midterm elections on November 8 and the U.S. shopper worth index (CPI) announcement on November 10, the index faces a critical sell-off from the channel resistance, it might drag Bitcoin down with it, contemplating the present weak point within the crypto market. 

U.S. bond yields

The Federal Reserve has been closely shopping for U.S. bonds, which is widespread apply earlier than U.S. midterm elections. This has dropped the yield curves, and in return, boosted the fairness and crypto markets since October 13. 

Nevertheless, we have no idea if this development will proceed after the U.S. midterm elections. And if we see no new shopping for quantity comply with for the bond market, it might set off a sell-off for equities and cryptocurrencies.

Under is the 10-year U.S. bond yield chart. The yield dropped from 4.34% to three.90% on the week of October 24 and has been climbing again ever since. If the 4.34% resistance is breached upon a weekly shut, it might spell catastrophe for each the fairness and the cryptocurrency markets. 

10-year U.S. bond yield chart with the 4.34% resistance

10-year U.S. bond yield chart with the 4.34% resistance.

What if the $16,000 degree is misplaced?

If $16,000 is misplaced for Bitcoin, the obvious assist degree down under is the month-to-month assist from the earlier cycle, which is at round $14,000 (see the chart under).

Monthly chart for Bitcoin with the $14,000 support from the previous cycle

Month-to-month chart for Bitcoin with the $14,000 assist from the earlier cycle.

The $14,000 degree has lengthy been anticipated by an amazing variety of market gamers. Though Bitcoin typically likes to shock individuals, shedding the horizontal channel that it has been following since June (a.ok.a. closing November 9 under $18,000) might give the herd the chance to purchase Bitcoin at $14,000.   

Tune in subsequent week, and each week, for the newest CEX.IO crypto ecosystem replace. For extra info, head over to the Trade to examine present costs, or cease by CEX.IO College to proceed increasing your crypto data.

Disclaimer: Data supplied by CEX.IO will not be supposed to be, nor ought to it’s construed as monetary, tax or authorized recommendation. The danger of loss in buying and selling or holding digital property will be substantial. You need to fastidiously think about whether or not interacting with, holding, or buying and selling digital property is appropriate for you in mild of the chance concerned and your monetary situation. You need to consider your degree of expertise and search unbiased recommendation if obligatory relating to your particular circumstances. CEX.IO will not be engaged within the provide, sale, or buying and selling of securities. Please discuss with the Phrases of Use for extra particulars.

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