Cryptos Plunge With The FTX Bombshell

Cryptocurrencies succumbed in a big way to the pressure created by the events leading to the liquidity crisis at crypto trading firm Alameda Research and the FTX cryptocurrency exchange, both founded by Sam Bankman-Fried. Overall cryptocurrency market capitalization dropped below $900 billion.

Though cryptocurrency exchange Binance responded to FTX’s pleas for help and came forward with a non-binding LOI to acquire the rival, fears of a crypto contagion spooked markets. Apprehensions about whether the deal, which could result in Binance controlling a substantial part of the crypto world would be allowed by antitrust regulators also added to the negative sentiment.

Overall crypto market cap plunged around 11 percent in the past 24 hours, while the FTX Token (FTT) shed more than 72 percent in the same period. 12th ranked Solana (SOL) dropped more than 32 percent overnight, in what appears to be a dump by Alameda. Both FTT and SOL touched fresh 52-week lows.

Sentiment has been badly impacted as several other cryptocurrencies are at risk of being dumped by the beleaguered crypto trading firm. Close to 70 percent of the top 100 cryptos are trading with double digit overnight losses. Crypto market cap which was at $977 billion a day earlier dropped to as low as $852 billion, before recovering to its current level of $871 billion.

Stablecoin market cap remained steady at $149 billion, but dominance increased to 17 percent amidst erosion in market cap of the volatile cryptocurrencies.

The broad-based decline in the crypto market dragged down market cap of Smart Contracts category by 15%, DeFi category by 13% and Meme category by 11%. NFT & Collectibles category lost 16% whereas metaverse cryptos plunged 15%.

Market cap of cryptocurrencies belonging to the Centralized Exchanges category that comprises inter alia of BNB (BNB) and FTX Token (FTT) lost 11 percent whereas those belonging to the Decentralized Exchanges category declined 14 percent.

68th ranked PAX Gold (PAXG), a gold backed cryptocurrency bucked the trend to gain 2.2 percent in the past 24 hours. 81st ranked BinaryX (BNX), a metaverse and governance token has also gained more than a percent.

Bitcoin dropped to a fresh 52-week low as $17,402.55, and is currently trading at $17,582.45, down 10.3 percent on an overnight basis.

Ethereum plunged more than 17 percent in the past 24 hours and is currently trading at $1,212.03. Ether ranged between $1,564.55 and $1,157.23 in the past 24 hours.

Amidst the chaos in the crypto market, Binance CEO Changpeng “CZ” Zhao tweeted two big lessons, for crypto world to learn from the FTX fiasco. CZ’s tweet stated that “1. Never use a token you created as collateral 2. Don’t borrow if you run a crypto business. Don’t use capital ‘efficiently’. Have a large reserve. Binance has never used BNB for collateral, and we have never taken on debt.” The Binance CEO also promised to implement the ‘Proof of Reserves’ pledge by using a “Merkle tree” data structure that is used by blockchains to store transaction data.

The FTX bombshell and the carnage it triggered in cryptocurrency market has coincided with the uncertainty related to the U.S. mid-term elections as well as the anxious wait for the October readings of U.S.CPI. In a strange twist of events, the crypto market is bracing for the first anniversary of the crypto peak of November 2021 on an overwhelmingly bearish note.

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