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FTX continues to affect the market

FTX, the exchange giant that initiated Chapter 11 proceedings, continues to negatively affect the market. 

The overall situation after the collapse of FTX

The cryptocurrency market has been hit hard by the affairs of FTX and its founder SBF. 

In a three-card game, it turned out that what was supposed to be a hedging problem soon turned out to be something else. 

FTX was basically using investors’ money to lend it to Alameda Research (a company also connected to SBF) which used it for sponsorships and financing the American Dem Party. 

As a result of the events FTX saw everything it had accumulated depleted until it went into Chapter 11 and this made customer trust disappear, which also contributed to the market collapsing. 

Bitcoin is again at $16,000 while Ethereum $1,100, the lowest values since the pandemic to date. 

Decentralized finance takes the hit, seeing a quarter of its turnover vanish. 

The rest of the tokens have not been immune to the contagion and also DEXs, although they have been the least damaged, have plummeted. 

L1 tokens also suffered major losses, most notably SOL.

As a result of what happened with SBF, Layer 1 tokens fell 34% with Solana the unhappy protagonist of the collapse.

Both the volumes of centralized and decentralized wallets plummeted and cryptocurrency liquidity recovered slightly with resources fleeing FTX being intercepted mostly by Binance

The “Alameda Gap” is the index most affected by reporting a sharp drop in market depth after the eponymous company halted its operations.

The “hottest” days in terms of capital flight from the market seem to be gradually becoming more tepid and the market depth has risen from $112 million to $150 million. 

The depth of the market emphasizes the underlying supply and demand for Bitcoin but does not take into account investor-backed transactions.

The contagion of the SBF universe

Gemini, another exchange in the crypto world, suffers the contagion consequences of FTX. 

The platform said that the investment program as a result of the withdrawal halt put in place on Genesis is temporarily compromised. 

Things are no better at Liquid, the exchange had been purchased by FTX last spring and also had to resort to suspending trading and withdrawals from wallets. 

Crypto.com with its CRO token is being pointed at by many analysts as the next victim of the FTX contagion and bankruptcy. 

Fear of insolvency is spreading among insiders on the grounds that just as FTX depended on its token so seems to be the case for Crypto.com, basically weak hedges that are frowned upon by investors. 

The troubles for FTX despite the declaration of bankruptcy and the opening of Chapter 11 proceedings do not seem to end there. 

The company was the victim in recent days of a yet-to-be-identified hacker attack that took large amounts of capital away from the platform.

The exchanges affected by the attack were two worth 1 million LINK each for wETH using the CoW protocol.

A world outside FTX

Meanwhile, the cryptocurrency world is trying to put the pieces back together and rebuild what has been lost and not only in terms of trust, but for example, Cardano is about to launch its own stablecoins. 

The digital currency will comply with the most stringent regulations they said. 

Meanwhile, a $138 billion fund manager has planned to enter the crypto market and Uniswap has just launched two more smart contracts.  

Decentralized tokens have fared little better than Bitcoin while leaving a fifth of the value on the field.

Weekly trades of decentralized wallets also plummeted, dropping to $100 billion. 

The worst ones include Huobi and Bitfinex with losses of 82% and 75% on the weekly. 

Gemini is not having a good time and lost 56% of trades after the exchange closed its Earn program. 

Binance’s weekly trading volumes are down 60% but despite this it is by far the most used platform in the world. 

Investor confidence is at lows and so is confidence in CEXs which could benefit decentralized platforms. 

Decentralized platforms are subject to smart contracts and some risks are not entirely immune to risk at least in the short term but could temporarily benefit from the situation. 

Binance grows 7% in market share on Bitcoin touching 63%. 

The exploit is due to capital flight from FTX that also involved Bybit another winner in the situation with 3% growth in volume. 

The case of Grayscale Bitcoin Trust

Grayscale Bitcoin Trust is the biggest way for “classic” investors to get a foot in Bitcoin. 

The fund’s discount has hit an all-time low at 45%, with solvency concerns of parent company Digital Currency Group weighing on GBTC.

Investors are increasingly betting to the downside on Grayscale Bitcoin Trust (GBTC) precisely because of the feeling that they may run into liquidity problems on par with subsidiary Genesis.

GBTC records over $10 billion in BTC and remains the largest US ETF for its type. 

For comparison in terms of size, ProShares Bitcoin Strategy ETF (BITO) manages “only” so to speak, $540 million. 

As Grayscale causes concern, Binance and Bybit are celebrating perpetual futures by grabbing all those fleeing FTX. 

George Michael Belardinelli
George Michael Belardinelli
A former corporate manager at Carifac Spa and later at Veneto Banca Scpa, blogger and Rhumière, over the years he has become passionate about philosophy and the opportunities that innovation and the media make available to us, in particular the metaverse and augmented reality