This weekly piece of cryptocurrency value evaluation and thought management is dropped at you by the skilled staff at CEX.IO, your crypto information since 2013. At CEX.IO, we’re dedicated to offering the most recent value updates and considerate breakdowns to assist our customers take advantage of knowledgeable selections alongside their crypto journeys.
This week’s replace examines the continuing market crash brought on by the FTX turmoil.
Following Binance CEO, Chanpeng Zhao’s tweet on November 6 about liquidating all their FTT holdings, rumors went viral in regards to the attainable insolvency of the FTX trade. The value of FTT, the native token of FTX, dropped by over 90% since that day.
The collapse of the FTT token took your complete 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 undertaking intently associated to FTX and its proprietor, Sam Bankman-Fried, additionally noticed its native foreign money, 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 would additionally encourage altcoins to rally increased. 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 beneath.
So is the crypto market headed for brand 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 evaluations of correlated markets as we attempt to climate this storm collectively.
What occurred to FTX?
In keeping with Lucas Nuzzi, the top of R&D at CoinMetrics, Alameda Analysis may need gone bankrupt quickly after Terra’s collapse, together with distinguished crypto firms like Three Arrows Capital and Voyager. Alameda Analysis is the buying and selling agency of FTX, which in line with Nuzzi, was rescued by FTX again on September 28.
Nuzzi rested his argument on the truth that 173 million FTT tokens value over $4 billion grew to become energetic on-chain that day, which he exhibited in a Twitter thread. Within the thread, he additional demonstrated that every one these 173 million FTT tokens exchanged arms 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 value of money.
Contemplating this substantial outflow from FTX, the Alameda bailout seemingly 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 drive 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.
Nonetheless, proper on the following day, on November 10, Binance declared that it’ll not pursue the potential acquisition of FTX because of company due diligence in addition to the most recent information stories concerning 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 extra 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 troublesome to say. Nonetheless, the Terra scenario was exacerbated because of the value of its stablecoin, UST, and its platform token, LUNA, being decided by algorithms, which created a vicious loophole throughout a market meltdown. Because the 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 set 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 undertaking. Attributable to this, the turbulence surrounding the FTX trade 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 beneath).
Solana’s collapse within the wake of the FTX turmoil.
So as to add salt to damage, round 70 million SOL tokens can be unlocked this week, in line with Solana Compass, which constitutes 13% of the full provide and thus may set off additional draw back within the value of SOL.
As a matter of truth, the present value is sitting on very essential long-term assist. If the $15 assist stage is misplaced on a weekly shut, it might be a freefall for Solana right down to the $5 stage (see the chart beneath).
Weekly Solana chart with the $18.50 and $5 assist ranges.
Bitcoin is on life assist
The current value rally from $18,000 to $21,500 had planted hopes in your complete 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.
Nonetheless, Friday’s transfer from $20,000 to $21,500 ended up being a bull lure when your complete transfer was negated by the crash on November 8 (see the charts beneath).
Bitcoin/U.S. greenback candlestick chart between November 4 and eight. Supply: Tradingview.
Day by 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 fair cheaper price than the June low at $16,000.
Bitcoin/U.S. greenback chart with the value breaking down the horizontal channel.
If the November 9 candle closes the day beneath the horizontal channel that Bitcoin has adopted for the reason that June backside (circled in orange within the chart above), considerably decrease ranges might be on the horizon. The following transfer of the S&P 500 inventory index this week may shed some mild on whether or not we’ll go a lot decrease or not.
S&P 500 may be very essential this week
Going ahead, the S&P 500 inventory index, the asset class to which Bitcoin has been most intently correlated, might be very essential for the route of Bitcoin.
The index is at present struggling at a significant resistance, which is the rising channel resistance that it broke down from final summer time (see the chart beneath).
S&P 500 index value chart with the rising channel resistance.
If, following the U.S. midterm elections on November 8 and the U.S. shopper value index (CPI) announcement on November 10, the index faces a severe sell-off from the channel resistance, it may drag Bitcoin down with it, contemplating the present weak spot within the crypto market.
U.S. bond yields
The Federal Reserve has been closely shopping for U.S. bonds, which is frequent observe earlier than U.S. midterm elections. This has dropped the yield curves, and in return, boosted the fairness and crypto markets since October 13.
Nonetheless, we have no idea if this pattern will proceed after the U.S. midterm elections. And if we see no new shopping for quantity comply with for the bond market, it may 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 may spell catastrophe for each the fairness and the cryptocurrency markets.
10-year U.S. bond yield chart with the 4.34% resistance.
What if the $16,000 stage is misplaced?
If $16,000 is misplaced for Bitcoin, the obvious assist stage down beneath is the month-to-month assist from the earlier cycle, which is at round $14,000 (see the chart beneath).
Month-to-month chart for Bitcoin with the $14,000 assist from the earlier cycle.
The $14,000 stage has lengthy been anticipated by an awesome variety of market gamers. Though Bitcoin typically likes to shock individuals, shedding the horizontal channel that it has been following since June (a.okay.a. closing November 9 beneath $18,000) may give the herd the chance to purchase Bitcoin at $14,000.
Tune in subsequent week, and each week, for the most recent CEX.IO crypto ecosystem replace. For extra info, head over to the Change to examine present costs, or cease by CEX.IO College to proceed increasing your crypto data.
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