Key Point: FTX may or may not be the next three-arrow capital, but in a bad market environment, when there’s a big short fire, the market is in a herd mentality, and panic increases, while digital assets are expected to shrink significantly further, the FTX is likely to cash out heavily in the short term due to protection and turnover, which will lead to weak short-term buying and heavy selling of digital assets, market vulnerabilities have risen dramatically, increasing the risk of an accelerated fall in currency prices. More alarmingly, if there is such a downward spiral, the real risk of a run on the FTX will come. In addition, from a macro perspective, the U. S. stock and bitcoin closely linked, the U. S. mid-term elections, as well as this week’s CPI data is also likely to further hit market confidence, do not rule out being the last straw to crush the camel. The following article will explore these points in detail.
Several facts behind the FTX incident cannot be ignored
About FTX incident, the media has reported in great detail, this article only briefly introduced the outline, in order to comb the timeline, this article focuses on some potential facts, and to be analyzed.
FTX incident, first of all, Coindesk Alameda financial data, the market uproar, panic began to spread. Ho Yi, co-founder of currency security, made a dig at the incident as speculation mounted about the financial health of the FTX and Alameda. Whale Alert then detected a $580 million FTT transfer from an unknown wallet to the security firm, which CZ said was the fact that security was liquidating the FTT, a “Butterfly effect” that set off a spike in market panic, the casting pressure begins. Subsequently, SBF and CZ and other simple expression of ideas after saying that there is no intention of war. Caroline, Alameda’s CEO, dismissed Coindesk’s report as untrue, saying it had more than $10 billion in assets that were not reflected there, and later offered to buy all FTT’s for $22.
So what are the risks and facts behind this story that are worth noting?
- The epic reversal of the plot, CZ announced that it will completely acquire FTX
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- Why is Core Scientific, the largest bitcoin miner in North America, on the verge of bankruptcy?
1. FTX and Alameda are close, the founders are SBF, FTX after the Luna crash, frequent involvement in unsecured loans, the purchase of bankruptcy liquidation companies, spending sponsorship, etc., one of the companies involved in the acquisition of more well-known, including Celsius, Blockfi, Voyager and so on. This is also the point of a well-known figure on an exchange, who may be throwing money around or overdoing it.
2. On September 22nd it emerged that FTX, a crypto exchange, was in talks with potential investors to secure up to $1bn in new funds, possibly related to the source of the report. In January, FTX Trading Ltd.. It announced the completion of a $400M Series C funding round, valuing it at $32bn, with investments from SoftBank, Paradigm, Tiger Global and the Ontario Teachers’ Pension Planning Commission. The FTX has raised money frequently, either to expand its business footprint or to plug a funding gap.
3. Currency security he yi said, currency security clearance FTT decision-making by the risk monitoring system. This means that even if the FTX says there is no financial problem, Ann still thinks there is a problem from a risk control perspective (the FTT is at a bear market low), although the market does not know where the risk is, but given the Luna Thunderstorm, the follow-through became the market’s tendency to panic.
Four. Alameda said he was willing to pay $22 for the FTT. Now that the FTT has dropped below $22, the psychological defenses of the market have been breached, and the panic has begun to spread like dominoes. Xu Mingxing seems to have also smelled this kind of crisis, came out to break up the fight said: “FTX annihilation of the entire industry is useless, Hope CZ and SBF reached a new agreement, help FTX from the current rumors recovery is the best choice for CZ.”
5. Faced with massive user withdrawals, Alameda and FTX began to mobilize large amounts of money to cope with the run, and to sell off their holdings of other cryptographic assets for disk protection, including assets that may also include BIT, the risk of FTX has essentially spread to the market as a whole, and the risk of a death spiral is rising if the big bears follow suit. Total deposits of Erc20 tokens (including the ETH) on the FTX were $540m in the past 24 hours, with withdrawals of $1.2 bn and a net outflow of $653m, according to Nansen.
6. According to the chain, FTX stopped processing customers’ withdrawal requests for a while. The last FTX transaction on the Ethereum blockchain took place at 18:37 China Standard Time on Nov. 8, and some users said they were waiting in line for their withdrawals. FTX addresses on Tron and Solana blockchain have a similar situation.
How the FTX incident will affect the crypto market
As can be seen from the above analysis, Alameda and FTX have made great strides over the past year, which has led to their cash on hand to become less abundant, so frequently through financing to ease the pressure. From the chain of data, its assets are generally relatively dispersed, so there will be a continuous flow of funds to withdraw the FTX, which led to encryption ecology began to appear liquidity problems. In terms of outflows, market panic spread quickly, with a net outflow of $653 million. From the price point of view, FTX events have spread to the encryption market, and the encryption market to a very important point.
The reason why this is a very important point, we need to further from the price. The FTT China Standard Time below $22 as of 17:00 p.m. on Nov. 8 and is now trading at $18.36, caroline, Alameda’s chief executive, has said she wants to match the selling pressure at this price point. If the FTT continues to collapse, the FTX run will intensify, even if there is a run on traditional banks, it will bring down other ecological projects further, examples include public chain Solana (Sol) , which the SBF has heavily promoted, Bitdao (BIT) , which had a tokens swap agreement with the FTX, and Abracadabra Finance (MIM) , a decentralised stable currency project that uses the FTT as one of its main collateral assets. Sol’s recent success with Google Cloud, the launch of Instagram on NFT, next month’s delivery of its mobile phone, and the imminent launch of its EVM-compatible network are just a few examples of the scale of the market’s fears. The collapse of FTX’s ecological empire is bound to further affect the entire encryption ecosystem. At present, Bitcoin has already dropped below the psychological threshold of 20,000 US dollars, and Ethereum has dropped below 1,500 US dollars, of which 20,000 US dollars bitcoin is also a very important psychological and support position. If the FTX thunderstorm, a collapse in bitcoin is not out of the question, as the FTX is probably bigger than three arrows.
From a macro perspective, the correlation between us stocks and bitcoin is relatively high. US stocks closed higher overnight, and Bitcoin briefly stabilised. This shows that the strength of us stocks will have a positive effect on bitcoin in the short term. Wilson, chief strategist at Morgan Stanley, a prominent short-seller on Wall Street, said investors should remain bullish until the week’s United States midterm election, polls suggest Republicans will win at least one house of Congress, which could act as a potential catalyst for the downward trend in bond yields and a rally in stocks that could sustain a bear market rally. In this period of time, may be the tightest window period of FTX self-help. In addition to the mid-term election impact, US stocks this week are bracing for the crucial October CPI inflation data, which could also be a blow to the crypto market if it is too poor.
Winter has come, the most important thing is to survive
November 7 is the beginning of winter, the encryption market winter seems to be on schedule. The possibility that the FTX could be the next three-arrow capital may be relatively small, but in a bad market environment, if there is a big short snipe, the market in the herding effect, increased panic, while digital assets are expected to shrink significantly further, the FTX is likely to cash out heavily in the short term due to protection and turnover, which will lead to weak short-term buying and heavy selling of digital assets, market vulnerabilities have risen dramatically, increasing the risk of an accelerated fall in currency prices. More alarming is that if there is such a downward spiral, the real risk of a run on the FTX will come, and the risk of a collapse of the market is expected to increase significantly as a result. In addition, from a macro perspective, the U. S. stock and bitcoin closely linked, the U. S. mid-term elections, as well as this week’s CPI data is also likely to further hit market confidence, do not rule out being the last straw to crush the camel.
However, the short-term market ups and downs, because of the lack of central exchange transparency, some of this article’s judgments may also be biased. However, from a macro perspective, bitcoin has fallen from close to 70,000 US dollars. The current consolidation period is still relatively short. There is an overall lack of momentum in the market, and panic is relatively easy to spread. In general, it is too early to call a trend rally, but the downside risk is relatively high.
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