Crypto Crisis: Bitcoin Drops 17% and No Hope
The crypto industry is in the midst of a new crisis of confidence.
As crypto prices begin to stabilize, the new drama has derailed the sense of relief that has finally settled into the crypto market this year.
The consequences and impact of this drama are far from established because the shock is so great.
Sam Bankman-Fried, who emerged this summer as the savior of crypto companies on the brink of bankruptcy, agreed within 24 hours to sell his empire to his great rival Changpeng Zhao.
This empire was formed from the exchange FTX.com, two of which are represented by sports stars Stephen Curry and Tom Brady. There is also the Alameda Research high-frequency trading platform. Financial details of the transaction were not disclosed.
But this transaction is more of a relief as Zhao pointed out that FTX and Alameda are on the verge of insolvency.
“This afternoon, FTX asked for our help,” Zhao, Co-Founder and CEO of Binance, wrote on Nov. 8, “There is something important. Liquidity crunch. To protect users, we signed a non-binding PROFIT, intending to buy back http://FTX.com in its entirety and help solve the liquidity problem. We will conduct a full DD in the coming days,” he added.
If Bankman-Fried, the company that extended a line of credit to fintech BlockFi and received a stake in the popular trading app Robinhood (HOOD) – Get a free report At the height of the credit crunch last summer, who was safe or immune from the liquidity crunch?
This very question was widely circulated on Nov. 9. Investors seem to be wondering if the crypto industry still has any corpses left in its closet. Their challenge is made possible by the drop in the price of cryptocurrencies.
Risk of infection
The crypto market has dropped 12.3% in 24 hours. The market is now valued at $887 billion. As a result, it is down more than $2.1 trillion from the record $3 trillion reached in November 2021. In a year, the situation has completely deteriorated.
Bitcoin (BTC) price drops 16.6% to $17,188.00, according to data firm CoinGecko. The most popular cryptocurrency seems to be on its way to pushing new levels down. BTC has now lost 75.4% of its value since its all-time high of $69,044.77 reached on November 10, 2021.
The price of ether (ETH), the second coin by market value, is down 24.3% at $1,184.53. ETH is down 76.1% from November 10, 2021, an all-time high of $4,878.26.
Cryptocurrencies linked to decentralized finance (DeFi) projects are on the rise. Solana (SOL) is down 42.7% in the last 24 hours, Cardano (ADA) is down 13.6%, Polkadot (DOT) is down 12.5%.
Meme Coins Dogecoin (DOGE) and Shiba INU (SHIB) lost 21.4% and 15% respectively.
Perceptions seem to have changed in the crypto industry. Many experts and industry sources believe that Bankman-Fried and his empire are the most financially solid players. Their lack of cash is a blow that is likely to leave an indelible mark on the crypto sector for years to come.
There’s also the question of the deal with Zhao and his company Binance, the world’s largest cryptocurrency and digital asset exchange.
Sean Farrell, head of FS Insight of Digital Asset Strategy, said: “There is reason to believe that the risk of further contagion remains due to nonpayment of loans to Alameda. “From a strategic perspective, we think it’s wise to reduce exposure to Solana ($SOL) in the near term.”
Furthermore, given the current unknowns, it may be prudent to raise some cash in the event of further withdrawals on other major cryptocurrencies, he added.