Is the Cryptocurrency Market Collapsing?

Because Binance abandoned the FTX acquisition, the cryptocurrency market crashed for the second day, sending Cryptocurrencies into the red. With renewed investor skepticism, the value of cryptocurrencies like Bitcoin and Ethereum has dropped by almost 20%. 

The total value of all cryptocurrencies on November 10 was $840.53 billion, down 3.53 percent from the previous day. Defi’s current trading volume of $8.65B is 4.51 percent of the 24-hour crypto market.

Bitcoin, the largest cryptocurrency in the world, has remained stable at $16,706 despite a 24-hour drop of 8.67%. Ethereum, the second most traded digital currency, is down 8.42% at $1,184.96 as of 1300 IST, when this piece was written.

Solana dropped from $17.40 to $15.80, while recently-in-the-news FTX fell by 42.82 percent. BNB, another popular cryptocurrency, saw a 10.63% drop in value during the past day, while Tether saw a 0.293% drop.

In contrast, Maker rose 16.12%, Loopring gained 5.6%, and Terra Classic rose 4.5%.

Terra Luna Classic, dYdX, Maker, and Loopring are now the top-performing models. In contrast, some of the biggest decliners included FTX, Solana, Kava, and Thorchain.

Inflation-indexed Meme Coins Decrease By 18.92%

Meme coin prices have fallen by 62.43 percent over the past week and 18.92 percent over the past day. At this time, one MEM costs $1.792496. At press time, one may buy three hundred and ninety-three percent less valuable Dogecoin for $0.084492 and two and a half percent less valuable Shiba Inu for $0.000010 on the cryptocurrency market.

Metaverse Tokens in Red

Popular tokens in the metaverse market dropped in value. There was a reduction of 10.70 percent in the value of Decetraland to $0.496564, 8.98 percent in the value of the Sandbox to $0.630009, and 12.32 percent in the value of ApeCoin to $3.38.

Furthermore, the virus associated with FTX keeps spreading, dragging the cryptocurrency market down. Just what is needed to stop this downward spiral?

As the ripple effects of the FTX and Alameda collapse continue to shake the crypto market on November 21, cryptocurrency values are falling across the board.

Multiple scandals and unanticipated market volatility have blown big holes in the balance sheets of significant cryptocurrency corporations like Digital Currency Group, causing a severe liquidity crisis.

These factors strongly influence market participants’ attitudes about high-volatility risk assets. The lack of demand for cryptocurrencies directly results from the current uncertainty regarding which key market makers and crypto businesses are solvent and which are not.

Bitcoin Had a Rough Start to the Day

Bitcoin’s price, at $16,455, temporarily dropped below the $16,000 barrier, and Ether’s price, at $1,160, continues to fall as concerns about huge sales of Ether by key market makers and the FTX hacker weigh on the value of the altcoin

The Market Was Frightened By Concerns of a Crypto-contagion

There have been repercussions throughout the cryptocurrency market from the bank run and subsequent bankruptcy filing of FTX, and Digital Currency Group (DCG) is now experiencing liquidity challenges.

The liquidity crisis has resulted in a 50% discount on the net asset value of DCG’s Grayscale Bitcoin Trust (GBTC) and reports of hundreds of millions in losses at Genesis, a market-making and loan provider for DCG (NAV).

The FTX Exploitor, a black hat hacker, is affecting markets by selling significant sums of Ether into Bitcoin and the FTX-induced contagion.

Ether is trading for less than $1,200, a loss of 4.2% on the day following the FTX “hacker’s” sale of 50,000 Ether.

Constant Regulatory Pressure

There has been a long-standing rift between the cryptocurrency industry and regulators, likely stemming from misunderstandings or distrust regarding the true utility of cryptocurrencies.

The lack of a unified framework for crypto sector regulation has led to a patchwork of contradictory policies about the legal status of cryptocurrencies and whether or not they should be considered an asset.

Industry experts feel that once a more widely accepted and understood set of rules is adopted, the mainstreaming of cryptocurrencies can occur. This is a significant factor weighing growth and innovation in the sector.

Bitcoin and other cryptocurrencies are risk assets, and as a result, they are susceptible to investors’ moods. Cryptocurrency prices continue to be affected every month by the potential for unfavorable restrictions or, worst case, an outright ban.

As a result of the FTX scandal, regulators may increase strict enforcement, as foreshadowed by Germany’s announcement that they are investigating Coinbase’s business operations. The United States appears ready to step up regulatory oversight as well.

Investor Confidence Took Many Severe Hits Due to Liquidations Caused by Fraud and Ponzi Schemes

Fraud, Ponzi schemes, and extreme market volatility have contributed to 2022’s steep decline in cryptocurrency prices. There is a lack of regulation, the cryptocurrency business is still in its infancy, and the market is still relatively small compared to stock markets, all of which combine to make bad news and events that impair market liquidity have catastrophic results. It is why account verification is so important. 

After a margin call went unanswered, DCG’s Genesis Trading has felt the effects of Three Arrows Capital’s (3AC) implosion. Genesis Trading has $176 million locked on FTX in addition to the $38 million losses from 3AC. Financial difficulties meant that Genesis Trading had to approach DCG, its parent firm, for a $175 million financial infusion.

Given Bitcoin’s dominant market share, other cryptocurrencies’ values would likely move in tandem with Bitcoin’s.

Multiple liquidations drove down the price of Bitcoin as FTX imploded, and investor mood plummeted.

In the event of a DCG collapse, a similar event may occur, though perhaps on a far larger scale.

What Do the Years 2022 and 2023 Have in Store?

Dropping cryptocurrency prices can be traced back to reckless lending, a lack of adequate capital restrictions, and the resulting panic among investors due to previous failures in the industry. The DCG dispute with Genesis Trading and Grayscale will exacerbate investors’ worries about liquidations and capitulation.

The good thing today is that the casino industry has included cryptocurrency to become part of it. Most gambling sites with guides like where gamble betting guides have added crypto as one of the payment options today. 

Investors’ risk tolerance is expected to remain subdued for the time being, and prospective crypto traders may want to wait for signals that U.S. inflation has peaked and for the regulatory environment to become more apparent before making any moves.

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