• Forex
  • Investments
  • Loyalty program
  • Promotions
  • Analysis
  • Getting started
  • About us

Why are major cryptos falling this week?

Looks like crypto’s turmoils aren’t quite over just yet.

Just as the Terra and Luna implosions over the summer are fading into the rearview mirror, up pops fresh concerns over the financial stability of another major industry player: Alameda Research.

Alameda is the trading firm of Sam Bankman-Fried (or “SBF” for short), who founded the world’s 7th largest crypto exchange, FTX.

  1. On November 2nd, an article by CoinDesk highlighted that much of the US$14.6 billion balance sheet at Alameda Research mainly comprised of the FTT tokens that are issued by FTX.

    In other words, Alameda’s balance sheet may not be as strong as some people think, propped up by tokens created out of thin air by its sister company, amid heightened speculation about Alameda/FTX may even actually be insolvent.

     
  2. After that article was published, then entered another crypto heavyweight.
    The CEO of Binance, the world’s largest crypto exchange, then tweeted that it will be selling about US$ 530 million worth of the remaining FTT tokens that Binance holds. Binance CEO Zhao “CZ” Changpeng also tweeted that this move also stemmed from “learning from LUNA”.

 

Amid such troubling news, Bitcoin has hurtled back into sub-$20k domain after suffering three consecutive days of declines.

The world’s oldest and largest crypto is now testing its 50-day simple moving average (SMA) for critical support at the time of writing.

Bitcoin has hurtled back into sub-$20k domain

 

 

Similarly, Ether has seen 4 straight days of declines, racing toward its own 50-day SMA, having previously been resisted by its 200-day counterpart.

Ether has seen 4 straight days of declines

 

Even FTT’s trading volumes skyrocketed to its highest in over a year, highly unusual for a token that’s relatively illiquid.

Rumours of a public “fight” between CZ and SBF haven’t helped sentiment, although to be fair, CZ has since tweeted today that he spends his energy “building, not fighting”.

SBF has also sought to clarify matters, tweeting the following:

  • “FTX is fine”
  • FTX “has enough to cover all client holdings”
  • FTX has “ >$1b excess cash”

 

Still, that hasn’t stopped market participants from selling/withdrawing first, while waiting for the storm to clear up.

According to researcher Nansen, crypto lender Nexo and asset manager Arca have already withdrawn about US$219 million worth of Ether and stablecoins out of FTX so far this week.

Other headlines surrounding major crypto players have also added to the downcast sentiment:

  • Riot Blockchain, a major Bitcoin miner, posted a 28% year-on-year drop in its Q3 revenue, while losses more than doubled to US$36.6 million compared to the same period in 2021.
     
  • Another Bitcoin miner, Core Scientific, recently warned that it could run out of cash by the end of 2022 and may seek bankruptcy protection.
     

Clearly, the ongoing selloff suggests that recent gains in major cryptos have been built on shaky ground, even as the industry continues to churn out worry-inducing headlines.

In addition, the broader market sentiment has not been conducive for riskier assets to stage a sustained recovery.

After all, stocks have been plagued by persistent fears that the Federal Reserve has more rate hikes in store as long as US inflation remains persistently elevated.

And as long as the crypto world struggles to allay industry-specific concerns, including the true financial standing of its major players, then crypto prices should have a tough time moving past the ongoing crypto winter.

 

Share

There's a better website for you

A new exciting website with services that better suit your location has recently launched!

Sign up here to collect your 30% Welcome Bonus.