Cryptocurrencies have gone into panic mode after the bankruptcy of FTX and the rumors that also point to Crypto.com as one of the exchanges candidates for short-term problems. As of today, Bitcoin has lost 75% in value compared to last year, Ethereum has fallen 74% but other large-cap altcoins such as Solana have accumulated a 95% loss compared to the same date in 2021. A disaster that, far from stopping, aims to worsen in the coming days.
The cryptocurrency sector is not raising its head and according to the latest events, everything indicates that everything may continue to get worse. First of all, we have to look back and understand what is happening at the macroeconomic level, which also has its share of responsibility.
Skyrocketing inflation hurts crypto
The uncontrolled rise in prices has caused a chain reaction of the main central banks that have been forced to raise interest rates . This implies that risky assets are no longer attractive and large funds seek more conservative formulas such as bonds so that money continues to generate returns. This situation has taken the stock markets of half the world ahead, but it has also had a considerable impact on cryptocurrencies. Thus, for example, we have seen all the indebted growth companies fall and also other technology companies that had skyrocketed their capitalization due to the market situation and the entire post-covid recovery.
It’s all bad news for cryptocurrencies
In any economic cycle it is necessary for events to take place that could lead to a change in the cycle or a flight of money towards more conservative sectors. In the case of cryptos , we have had several ” black swans ” in recent months, starting with the moon fraud . The famous coin and its founder swept away tens of thousands of investors who trusted the project and it turned out to be a kind of ponzi system. To this day, its founder Do Kwon is still in search and capture and South Korea has confirmed that the person responsible artificially manipulated the price of the “altcoin”.
After Luna came the collapse of FTX , one of the main cryptocurrency exchanges that saw its token called FTT go from $20 to less than $2 in a few days. Likewise, Binance, the main exchange company worldwide, tried to come to the rescue of its competitor, but when they saw the numbers they had to back down because the hole was unapproachable. Sam Bankman-Fried, founder of FTX and who at his peak accumulated a fortune of more than 20,000 million dollars, limited himself to publicly apologizing and acknowledging that “he had screwed up .” Unlike the founder of Luna, the young American has lost his entire fortune, also causing an unprecedented reputational crisis in the sector.
All these events have caused a crash of all cryptocurrencies for multiple reasons. The first option commented by the experts is that after so many frauds, it is more than certain that the regulation of the sector will increase not only in Europe but also in the United States. The economic context does not help either and it is that despite the fact that the CPI data in the United States have improved, large capital is fleeing from extremely high-risk products such as bitcoin.
As if that were not enough, Cripto.com is another of the exchanges that has set off all the alarms when suspicious movements of money are verified. In an exercise of transparency, several companies published their capital reserves to reassure users. The thing is, Crypto.com withdrew over $400 million worth of Ethereum upon publication. The CEO came out of the news stating that it was a mistake , but the truth is that the utility token of the company called CRO began to collapse in the same way that FTT did last week. As if that were not enough, it is a company where 20% of its funds are in Shiba, a useless altcoin that is considered a “shitcoin”, from English we already know what it means.
After having laid off 40% of its workforce and having made multimillion-dollar investments in sporting events, Crypto.com is in the crosshairs and has sparked panic among investors. KuCoin , another of the acquaintances has seen today how its Token has plummeted after the uncertainty, although it has finally recovered ground.
The next few days will be crucial for the sector that is experiencing one of the harshest “crypto-winters” in its history and that could leave prices unimaginable a year ago when Bitcoin closed around $70,000. How far can you go down? One of the best-known investors made his predictions a few days ago and left the price of Bitcoin between 12,000 and 13,000 dollars . This means that the rest of the coins could correct an additional 30-50% from current prices. All a bleeding that will cause margin calls and massive liquidations.
