Crypto Tremors Has Shaken Global Investor Confidence

Crypto Tremors Has Shaken Global Investor Confidence    

Following the FTX crypto exchange liquidity crunch, the crypto market has become even more uncertain. Crypto investors could be in for a long crypto winter. Prices have fallen globally as a result of panic selling triggered by FTX's insolvency reports. While Bitcoin dropped below the USD 20,000 mark, Ethereum stared at a major decline below the USD 1,500 level.

FTX Fallout Could Have Long-term Impact

The second-largest global crypto exchange, FTX, is in deep trouble in a prevailing bearish market. The native FTT token has nose-dived to new lows, and investor confidence is badly shaken.

"Globally, the FTT token has a market cap of USD 2 billion. So USD 2 billion worth of crypto is going down. People are losing trust in the second-biggest crypto exchange in the world. We are already in a bear market, so it’s not good timing, and now people will be apprehensive towards many exchanges and might question their credibility," said Kashif Raza, founder of Bitinning.

The Bahamas-based exchange’s native token, FTT, has fallen on reports that sister company Alameda Research’s balance sheet had stocked FTT tokens, which comprised around USD 6 billion of its USD 14 billion assets.

Selling pressure intensified after the CEO of the world’s largest crypto exchange, Binance, Changpeng Zhao, said the company would be liquidating all the FTT tokens held by his exchange. Bitcoin and Ethereum have plunged following the reports, and the overall market has been deeply dented.

"FTT is down in the USDT market by 23 percent. The token’s current price at around USD 17.212 is a dramatic 79 percent drop from its all-time high of USD 85 around a year ago," said Rajagopal Menon, Vice-President at WazirX.

The Crypto Impact on India

The impact in terms of volumes is expected to be less in the Indian market because the market has already shrunk significantly since the government introduced TDS (tax deducted at source) on the sale of crypto assets.

"The overall crypto market sentiment has been bearish for quite some time, so there aren’t enough volumes as far as Indian exchanges are concerned," said Sharat Chandra, co-founder of the India Blockchain Forum.

However, given the global economic scenario, in which most asset classes are struggling, a full-fledged recovery or rebound could take some time, he added.

Menon said the volatility is expected to be led by FTT tokens and BNB (Binance coins), with a sell-off likely to be seen across both exchanges. As investors wait and watch to see how the fight between the two exchanges pans out, any adverse event could affect the entire crypto market, he said.

Experts believe there could also be more such cases of stocking up on balance sheet assets, because of which the sentiment in the crypto market has turned very negative. This has been made worse by the bearish views of the technical experts, who are predicting new lows.

"Indian exchanges will also feel the heat, especially the ones that have listed FTT tokens. There could be a lot more volatility in the coming days. 1-2 more negative news flows and we could see panic being triggered in the market," Raza said.  

Chandra added that currently, the crypto market is well-suited for institutional or long-term investors but not retail investors, "who have taken a back seat and might continue to stay low for 6–8 months."