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Pessimism for cryptos, as they regain "some order" after FTX bankruptcy

By Álvaro Estevez / Alejandra Zamora

Date: Wednesday 16 Nov 2022

Pessimism for cryptos, as they regain

(Sharecast News) - Little has changed in the cryptocurrency market during the last 24 hours. Movements are conspicuous by their absence and investor sentiment, although more optimistic than in previous days, remains very negative. During the last day, Bitcoin (BTC) has briefly managed to exceed $17,000, but is again below this level and seems unable to break this resistance. Ethereum, meanwhile, continues to show no signs of being able to break through the $1,300 barrier.
"Activity levels in cryptocurrencies remain elevated, but there are signs that some order may be returning after the FTX collapse. Bitcoin is struggling to regain the $17,000 mark, with daily volatility at 91.64% vs. 67.48% for the month," noted Michael Hewson, chief market analyst at CMC Markets UK.

Despite the bad moment for cryptos, yesterday, on Tuesday, the market received two pieces of good news that helped to lift the spirits a little. Firstly, the Producer Price Index (PPI) showed a lower than expected reading in October, in line with last week's good headline inflation data. All in all, the Fed holds firm to the stance put forward by Powell earlier this month: there is still a long way to go to tame inflation.

On the other hand, Binance announced a "relief fund" to help cryptocurrency companies with liquidity problems. "To reduce the cascading negative effects of FTX, Binance is forming an industry recovery fund to help projects that are otherwise strong, but are in a liquidity crisis," announced Changpeng Zhao 'CZ', the CEO of the world's largest exchange. The firm indicated that it will "soon" provide more details about this.

In any case, sentiment is still mostly negative and some experts, such as those at JP Morgan, forecast significant falls for cryptos. According to data from cryptanalysis firm Arcane Research, volatility is at two-year highs and trading volume at yearly highs, which is resulting in a "highly distorted" market. "Cryptocurrency markets are badly affected, especially derivatives markets. The uncertainty introduced by the FTX insolvency has direct implications on liquidity, generating huge hedging demand. The period after March 12, 2020 is the only period comparable to the current state of BTC derivatives," wrote Vetle Lunde, senior analyst at the firm.

"The sentiment is bearish, very bearish. I think this trading range will last for a long time, about 6 to 12 months. This will probably have contagion implications, which will probably be reflected in BTC facing further downside stretches," the expert added, as he believes this is "likely" to have "negative regulatory implications on the market" and a "further decline in institutional presence." "The 'altcoins,' particularly the 1-s layer, and specifically the Solana ecosystem, will suffer massively. Don't buy the drop," Lunde warned, as he sees this moment as "a defining structural change for the market." "Correlations with other assets are going to plummet," he concluded.

As for the rest of the market, there is little news. Solana (SOL) continues to fall, dropping 2% in the last 24 hours, and is worth three times less than it was ten days ago. Polygon (MATIC) sinks 1% despite the fact that Nike will base its NFTs on its blockchain, and Shiba Inu (SHIB) is has risen almost 2% since yesterday, on Tuesday.

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