The FTX’s situation is not promising at the time of publishing. These are the additional comments I had.
Before the FTX incident, we analysed that there was a chance for the market to see one last pump before the end of the year.
After the incident and if there is no bailout for FTX, I would think this would be another black swan event. Based on what we see right now, there is only an $8 billion liquidity gap. Still, the numbers can go very high if you look at the ecosystem, Defi loan products and the various parties such as leading venture funds, sovereign wealth funds, and pension funds involved. The domino effects could be greater than the Terra/ UST event.
I know of a few venture capital companies who just did a restructure and are in the middle of another fundraising from the previous loss due to Terra. Now, they are being hit once again. I do not think their LPs are going to give them more money. They are gone. You will see them in the news very soon.
If you are not part of FTX ecosystem and have no exposure to them, you should continue to focus on your community, continue to build and ignore the noises. If you have exposure to FTX, my friendly advice is to protect your principal investment, exit while you can to stay afloat. The ride will be very bumpy.
Bitcoin, Ether in a sea of red. What next for the cryptocurrency market?
The scrapping of the Binance-FTX deal has shaken the confidence of investors already licking their wounds following the collapse of Terraform Labs, Three Arrows Capital and Celsius Network
The cryptocurrency market continued its death spiral for the second consecutive day after Binance scrapped a deal to acquire rival exchange FTX.
Prices of major digital assets tumbled to monthly lows, led by Bitcoin, which headed towards $15,000 before rebounding to about $16,800, still down about 10% over the past 24 hours.
Ethereum, the second-largest cryptocurrency by market capitalisation, dropped to $1,087.08 before staging a mini-rally and settling at about $1,180, about 10 percent lower over the past day.
It’s been a turbulent week for cryptocurrencies as the market reacted to reports surrounding two of the biggest cryptocurrency exchanges in the world. Binance, the world’s largest digital asset exchange by volume, said on November 8 it agreed to buy FTX and rescue billionaire Sam Bankman-Fried’s startup from a liquidity crunch.
However, Binance made a U-turn barely 24 hours later. It said that after due diligence and reports regarding mishandled customer funds and alleged US agency investigations, it decided to not pursue the FTX acquisition.
According to a Coindesk report, the native FTT tokens of the FTX, which are also owned by the company, were found in large quantities on the balance sheet of Alameda Research, a cryptocurrency trading company run by Bankman-Fried, prompting widespread criticism of the token.
This meant that Alameda was primarily based on a coin that a sister company created rather than on a standalone asset like fiat money or another cryptocurrency.
Fretting investors
Scurrying for cover amid rumours that the FTX would go bankrupt, investors liquidated their FTX-linked coins to reduce possible losses. Binance, which had more than $500 million worth of FTT on its books, began to sell its holdings, exacerbating the woes of an already ailing market.
The blow-hot-blow-cold relationship between Binance CEO Changpeng Zhao and Bankman-Fried shook the market’s confidence as investors fretted over every development in a sector already licking its wounds following the collapse of Terraform Labs, Three Arrows Capital and Celsius Network.
Among other major cryptocurrencies, Binance (BNB) was down 10 percent, Ripple (XRP) was 5 percent lower, Cardano (ADA) dropped 6 percent, Dogecoin (DOGE) declined 7 percent, and Solana (SOL) had plunged 30 percent when this was written.
While some experts said this may be an opportune time for institutional investors, others emphasised the urgent need for greater regulation of the crypto market.
Raj Kapoor, founder of India Blockchain Alliance, said individual investors may become inactive for a while and institutional investors will probably take advantage of the current discounts and hedge their bets.
“This development will give other exchanges a boost and investors should transfer their altcoins into Bitcoin, Ethereum, and other stablecoins and store them in a cold wallet until the market stabilises and wait for the upswing,” Kapoor said.
He added that the FTT fall may trigger a chain reaction of liquidations because FTX’s lenders may also collapse, taking investors down with them.
“I see a lot of other businesses and endeavours going out of business or filing for bankruptcy,” Kapoor said.
Sharat Chandra, cofounder of India Blockchain Forum, said the FTX fiasco exposes the lack of disclosure and transparency that afflict the current digital asset ecosystem.
Investor protection
“After the Terra Luna debacle, the FTX incident presents another opportunity to regulators to frame stringent regulations, which might end up stifling innovation. It’s time the G-20 members act swiftly and frame global regulations to avoid regulatory arbitrage and ensure investor protection,” he said.
Anndy Lian, author of NFT: From Zero to Hero, said if there is no bailout for FTX, this would be another Black Swan event. Looking at the ecosystem’s liquidity gap, Defi (decentralised finance) loan products and various parties such as leading venture funds, sovereign wealth funds and pension funds involved, the numbers can go very high.
“The domino effects could be greater than the Terra/UST event. If you are not part of the FTX ecosystem and have no exposure to them, you should continue to focus on your community, continue to build and ignore the noises. If you have exposure to FTX, my advice is to protect your principal investment, exit while you can to stay afloat. The ride will be very bumpy,” Lian said.
Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.
Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.
An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.