Now that FTX is complete, what does the future hold for Bitcoin, alternative cryptocurrencies, and crypto in general?
FTX was shut down and many other centralized cryptocurrency platforms followed suit. But is there a silver lining to this situation?
2022 has been a tough year for cryptocurrency, and November has been a particularly tough month for investors and traders.
The collapse of FTX (1) and the subsequent outbreak that threatens to drag other centralized cryptocurrency exchanges down could be beneficial in the long run, although it has been extremely painful for many people.
People found out, albeit in the hardest way possible, that exchanges operated banks with fractional reserve type practices to fund theirs based on speculation, leveraged investment opportunities in exchange to provide consumers with a “guaranteed” return. This information was revealed, even though people learned it in the most difficult way possible.
The saying “If you don’t know what the product is, then you are the product!” is making the rounds on crypto-related social media platforms like Twitter.
This was true in the case of decentralized finance (DeFi), and it is also true in the case of centralized cryptocurrency exchanges and platforms.
Who could have predicted that a few banking transactions at an inopportune time would bring down the whole house of cards by demonstrating that even though the transactions seem to generate massive profits and tons of chips on its books, many of them are completely unable respond to withdrawals from their users?
Who could have predicted that a few bank runs at an inopportune moment would bring down the whole house of cards?
They took your coins, used them as collateral, and then used the betting money to fund highly speculative investments.
They promised to contribute part of their earned yield by locking your funds in centralized DeFi platforms to earn more yield.
They invested customer money and company funds in illiquid assets that could not be easily converted into stablecoins, BTC or Ether; when customers and platform users needed to access their funds, they couldn’t.
Not your keys, not your money
Never before has the saying rung truer. Let’s take a look at some of the recent developments that have taken place in the cryptocurrency market this week.
A record number of coins have been pulled from exchanges by investors and placed in their custody.
According to a story published by Cointelegraph earlier this week, a record amount of Bitcoin, Ether and stablecoins were pulled from exchanges by panicked investors.
According to separate reports, there has been an exceptional increase in sales of hardware wallets as investors have become more aware of the importance of self-custody of their wallets.
It seems likely that this trend of coins leaving exchanges and going to hardware wallets will continue, especially if more and more exchanges go bankrupt and messages that they are “temporarily suspending deposits and withdrawals” continue to pop up. appear over the next few weeks. .
An increase in the number of deposits made on DEXs and DeFis can well be interpreted as a harbinger of things to come.
It has also been stated that there has been an increase in decentralized exchange (DEX) activity and influx into DeFi at the same time as there has been a record amount of cryptocurrency leaving exchanges. .
Trust in centralized cryptocurrency exchanges and businesses may have been damaged due to the events of the past two weeks. As a result, the current and upcoming wave of cryptocurrency investors may embrace DEX and DeFi protocols, which are more focused on Web3 technology.
Naturally, DeFi and DEX require a more open and transparent structure and processes to ensure users’ money is kept safe and spent “properly”.
Is this a “disaster opportunity” for crypto investors?
Currently, Ethereum price seems to be a bit weaker from a technical analysis perspective. Additionally, recent news of FTX holding the 31st largest spot position in Ether, as well as concerns about restrictions, centralization of power, US OFAC enforcement on this “whale” and other Ethereum-based methods that have exposure or bankruptcy proximity to FTX and Alameda, have garnered quite a bit of FUD.
Conversations about fascinating topics, such as the unpredictability of when the Shanghai upgrade will be implemented and investor concerns about when staked coins may be removed, have the potential to alter the short-term mood against Ether.
The thesis is not too complicated. ETH has held support in the $1200-$1300 range quite effectively throughout the previous months of adverse market events, but will the potential hurdles outlined above lead to a level test? one more time ?
Stakeholders are effectively spotted long and gain yield; therefore, at this stage, initiating a low level short position and taking profit orders between $700 and $600 could potentially be profitable.
At the time of writing, Ethereum was trading at $1,207.
Bitcoin was seen trading hands at $16,645.