The Derivatives Magazine #27
The past week can be surely called one of the darkest in the history of the crypto market. At the moment when the market's bottom and its possible gradual turn towards growth seemed to be looming, one of the largest centralized exchanges - FTX - went bankrupt, which caused a local collapse of the cryptocurrency market. Starting the week at $982.37 billion, within just two days the cryptocurrency market's total capitalization index fell to $741 billion, its lowest level since early 2021. Having slightly recovered by the middle of the period, by the end of the period the index had fallen back to around the lowest values of $758.2 billion. Weekly price volatility amounted to a record 25.42%.
While the crypto market was "bleeding", there was some positive news on the macro level. On November 10, consumer inflation data was released. It was 7.7% year-on-year in October compared to 8.3% year-on-year for September. The markets reacted positively to the news (it was the time when the crypto market slightly recovered from the fall) and there was a short rally in the S&P500 index and it topped over 4000 by the end of the week. Another big news was the midterm elections in the US Congress, where the Democrats lost their majority in the House of Representatives, but are likely to keep control of the Senate. So far, it is difficult to predict the impact of these results on the markets, but it is definitely positive that some active supporters of cryptocurrencies became congressmen.
Under the influence of the market collapse, as well as the discrediting of centralized exchanges, one of the most massive withdrawals of bitcoin from centralized exchanges in the history of cryptocurrencies occurred. In monthly terms, the withdrawals amounted to about 106 000 bitcoins. Users actively withdrew funds to non-custodial wallets, largely due to fears of a further, cascading collapse of centralized exchanges.
According to Glassnode, Stablecoin's net buying power on exchanges is up to $4 billion/month. This may tell us that despite the market turmoil, investors seem to prefer to hold bitcoin and ethereum (the most reliable assets) rather than centrally issued stablecoins at the moment. Market participants are definitely looking to increase the safety and security of their capital in the current turbulent environment.
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FTX collapse
The company said in a statement on Twitter that FTX and its subsidiary Alameda Research, as well as about 130 other companies, had filed for voluntary bankruptcy under the U.S. bankruptcy code. The company's CEO, Sam Bankman-Fried, resigned. By various estimates, he lost about 93% of his fortune. Bankman-Fried tried to save FTX, hoping it would be bought by Binance, the largest cryptocurrency exchange and a major competitor. Binance rejected the deal, after which FTX, a platform for buying and selling digital tokens, had to seek billions of dollars to allow users to access their money. Binance attributed its decision to identified mismanagement of customer funds, as well as reports of investigations by U.S. regulators into FTX. A hole of about $10 billion was discovered in the exchange's balance sheet. Many experts came to a consensus on the long-term effects of this event on the cryptocurrency market.
Sudden non-custodial wallet trend appears
The Trust Wallet token (TWT) has risen nearly 150% in the past six days, going against a market whose capitalization has declined by nearly $100 billion in the same period. The TWT price hit an intraday high of $2.43 on November 15, one day after setting a record high of nearly $2.75. TWT's lowest price in 2022 is $0.40, making it one of the fastest-growing assets with an annual gain of more than 225%. Distrust of centralized exchanges has sparked increased interest in non-custodial wallets. Binance CEO Changpeng Zhao's mention of Trust Wallet certainly played an important role in TWT's price rise.
OKX will create a $100 million fund to support the victims of the FTX collapse
Cryptocurrency exchange OKX plans to create a fund with $100 million in assets to support projects affected by the FTX liquidity crisis. According to the exchange, the initiative is aimed at qualified market participants experiencing technological, financial and other problems. The fund will help these projects to make a smooth migration from the affected platform. According to Crypto Fund Research, cryptocurrency funds' losses due to the bankruptcy of FTX could reach up to $5 billion. The crisis has affected 25-40% of industry investment structures that have invested in FTX or its utility-token FTT.
This overview was prepared by the analytics department of the Biqutex, an innovative crypto derivatives exchange. Trade an extended list of instruments (Perpetuals Swaps, Futures, Options, Calendar Spreads etc.) with up to 125x leverage and deep liquidity!
