Crypto costs area unit falling as investor fears over FTX’s solvency and the state of client funds send BTC and ETH value toward new lows.
Crypto costs are falling across the board on Nov. 8 as potential contagion from the FTX and Alameda controversy impact the entire crypto market.
Earlier within the day, Bitcoin, Binance coin, Ethereum , FTX token and Solana had seen sharp rebounds after news that Binance would acquire FTX, but the bounce was short-lived.
At the time of writing, FTT born below the $7 mark, registering a 70% loss on the day. Solana value is also fraught, facing an 18% correction as it trades below $25. after the Binance FTX news poor, BNB looked set to be the winner of the day, however the market-wide worsening failed to spare the exchange token, that presently trades at $328, reflective a 2.6% loss.
Concerns over the FTX record have caused the market to require a pointy flip downward once at the start the Binance LOI for FTX brought the markets upward. per reportage, FTX was apparently seeking to lift $6 billion greenbacks in finance to fill the gap in their record, putt the deal doubtless in risk.
One person briefed on the fundraising blitz said what started as a $1bn ask was looking more like $5bn-$6bn by midday. More here @semafor https://t.co/1sL68EeaYQ
— Liz Hoffman (@lizrhoffman) November 8, 2022
Fears of a bank run spook the market
The May 2022, Terra Roman deity bank withdrawal and ultimate collapse of Luna Classic reverberated through the cryptocurrency market, at the time transfer about the first 7-week losing streak in Bitcoin’s history.
Analysts are drawing parallels between this FTX bank run, the perceived large budget hole and what happened to Terra Luna earlier this year. These fears are adding ton investors’ fears about the cryptocurrency trade at large.
The persistent threat of regulation
The cryptocurrency business and regulators have a long history of not obtaining on either due to various misconceptions or mistrust over the actual use case of digital assets.
Without a working framework for crypto sector regulation, totally different countries and states have a plethora of conflicting policies on however cryptocurrencies are classified as assets and exactly what constitutes a legal payment system.
The lack of clarity on this matter weighs on growth and innovation within the sector, and lots of analysts believe that the mainstreaming of cryptocurrencies cannot happen till a more universally given and understood set of laws is enacted.
Risk assets are heavily impacted by investor sentiment, and this trend extends to Bitcoin and altcoins. To date, the threat of unfriendly cryptocurrency rules or, within the worst case, an outright ban continues to impact crypto prices on a nearly monthly basis.
After the FTX debacle, regulators may begin to step up strict enforcement as signalled by Germany announcing they are looking into Coinbase’s business practices.
Scams and Ponzis triggered liquidations and repeat blows to investor confidence
Scams, Ponzi schemes and sharp market volatility have also played a significant role in crypto costs crashing throughout 2022. bad news and events that compromise market liquidity tend to cause ruinous outcomes thanks to the dearth of regulation, the youth of the cryptocurrency trade and the market being relatively small compared with equities markets.
The implosion of Terra’s Luna and Celsius Network as well as misuse of leverage and shopper funds by three Arrows Capital (3AC) were every accountable for serial blows to plus costs at intervals the crypto market. Bitcoin is presently the largest plus by capitalization within the sector, and traditionally, altcoin costs tend to follow whichever direction BTC value goes.
As the Terra and Luna ecosystem collapsed on itself, Bitcoin value corrected sharply due to multiple liquidations occurring within Terra — and capitalist sentiment tanked.
The same happened with even greater magnitude once traveler, 3AC and Celsius folded, erasing tens of billions in investor and protocol funds.
( Kyle White, Cointelegraph, 2022 )