Now that FTX has been completed, what does the future hold for Bitcoin, alternative cryptocurrencies, and crypto in general?
FTX has been shut down, and many other centralized cryptocurrency platforms may follow suit. But is there a bright side to this situation?
The year 2022 was a difficult one for cryptocurrency, and the month of November was particularly challenging for investors and traders alike.
The collapse of FTX (1) and the subsequent epidemic that threatens to drag other centralized cryptocurrency exchanges down could be beneficial in the long term, even though it was tremendously painful for many people.
People discovered, albeit in the most difficult way possible, that exchanges were operating banks with fractional reserve-like practices to fund their own based on speculation, leveraged investment opportunities in exchange for providing consumers with a "guaranteed" yield. This information was revealed, although 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 true in the case of centralized cryptocurrency exchanges and platforms as well.
Who could have predicted that a few bank runs at an inopportune time would bring down the entire house of cards by demonstrating that even though transactions would seem to have massive profit and tons of tokens on one's books, many of them are completely unable to meet the withdrawals of their users?
Who could have predicted that a few bank runs at an inopportune time would bring down the entire house of cards?
They took your coins, used them as collateral, and then used the money from the bets to fund highly speculative investments.
They promised to contribute a portion of their earned yield by locking your funds in centralized DeFi platforms to gain more yield.
They invested customer monies and the company's funds in illiquid assets that could not easily be converted into stablecoins, BTC, or Ether; when customers and platform users needed access to their funds, they could not do so.
Not your keys, Not Your Cash
Never before has the saying rung more true. 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 were removed from exchanges by investors and placed into their custody.
According to a story that was published by Cointelegraph earlier this week, a record quantity of Bitcoin, Ether, and stablecoins was withdrawn from exchanges by investors in a panic.
According to separate reports, there has been an exceptional increase in the sales of hardware wallets as investors have become more aware of the significance of self-custody of their portfolios.
It seems probable that this tendency of coins having left exchanges and going to hardware wallets will continue, especially if an increasing number of exchanges go bankrupt and messages stating that they are "temporarily pausing of deposits and withdrawals" continue to appear over the next few weeks.
A rise in the number of deposits made at DEXs and DeFis can well be interpreted as a portent of things to come.
It has also been stated that there has been an increase in decentralized exchange (DEX) activity & inflow to DeFi at the same time that there has been a record amount of cryptocurrency leaving exchanges.
Trust in centralized cryptocurrency exchanges and companies may have been damaged due to the recent past two weeks' events. 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 DEXs require a structure and processes that are more open and transparent to guarantee that user money is kept safe and spent "correctly."
Is it an ‘Opportunity in Disaster' for Crypto Investors?
Currently, the price of Ethereum appears to be a little bit weaker from a technical analysis point of view. In addition, the recent news about FTX holding the 31st largest Ether spot position, as well as worries over restrictions, centralization of power, the United States OFAC enforcement on this "whale," and other Ethereum-based methods that have exposure or bankruptcy proximity to FTX and Alameda, have stirred up a bit of FUD.
Conversations about fascinating topics, such as the unpredictability of when the Shanghai upgrade will be implemented and the worries of investors about when staked coins will be able to be withdrawn, have the potential to alter the short-term mood against Ether.
The thesis is not overly complicated. ETH has maintained its support within the range of $1,200–1,300 quite effectively throughout the preceding months of adverse market events, but will the potential obstacles described above lead to a test of the level once more?
Stakers are effectively spotted long and earning yield; therefore, at this point, initiating a low-level short position and taking profits orders between $700 and $600 could potentially be profitable.
At the time of writing, Ethereum was trading at $ 1,207.
Bitcoin was seen exchanging hands at $ 16,645.