The Fall of FTX and Sam Bankman-Fried
Trouble seemed to start earlier this week, with concerns about the connection between Sam Bankman-Fried’s firms, FTX and Alameda Research.
Binance CEO Chengpeng Zhao said that the exchange would liquidate its holdings of FTX tokens (FTT). This was due to concerns over the solvency of Alameda, because over one third of its $14.6 billion in assets were FTT tokens.
Bankman-Fried refuted this claim, in a Tweet that was later deleted, but Zhao’s announcement triggered a mass liquidation of FTT, causing a liquidity crunch for FTX.
Zhao then said that Binance would acquire the exchange, but upon further inspection of its finances, the deal fell through.
Now withdrawals have crippled the exchange, and Bankman-Fried is seeking a nearly $8 billion bailout, in addition to being investigated.
This fiasco is affecting the broader crypto markets for two reasons. On the one hand, the portfolio of Alameda Research is being liquidated, which has implications for its large positions in SOL and FTT.
On the other hand, it is shocking how a crypto icon and personality such as SBF could have miscalculated so disastrously. The selling pressure and extreme bearishness could push the crypto market into the final phase of the bear cycle: capitulation.
Crypto Winter: Market Bearishly Rejected at 50-month EMA
If it had broken through the 50-month EMA at around $1.007 trillion, the crypto market could have surged around 60%.
Instead, it received a bearish rejection, bringing the market cap back to the support level of around $850 billion. If this support breaks, the crypto market could sink further to between $766 billion, or as low as $535 billion.
The FTT price Could Possibly Drop to Zero, but Will it Recover?
Due to the crisis, the price of FTT fell from just under $27 to around $2.5. As long as FTT tokens continue to be liquidated, the selling pressure will remain enormous. Theoretically, the downward scope is open to almost zero.
As soon as the liquidation of FTT tokens comes to an end, its potential recovery could be very strong. From the point of view of technical analysis, no meaningful statements can be made in extreme scenarios like these.
Solana Price is Falling below the $18-22 Support Zone
Selling pressure hit the price of Solana almost as hard as FTT. This is because FTX had Solana firmly integrated into their ecosystem. Additionally, Bankman-Fried had been an early, avowed investor in Solana.
Solana is currently at the support zone between $18 and $22. At this point, SOL could experience a strong bounce. However, if it breaks through this support, the price could even drop to the $5 level before hitting its next support level.
Ethereum Price is at Horizontal Support
ETH has also been hit hard. A few days ago, the price of ETH was around $1,700, but is now around $1,200. If Ethereum breaks the support between $1,200 and $1,250, it could return to yearly lows around $880. If this support also fails, the price could fall between around $290 and $400.
Crypto Winter: Bitcoin Price Reaches New Low for the Year
The price of Bitcoin has now fallen below the yearly low of $17,600, to around $17,114. Again, there is more downside potential, as the next BTC support level is around $13,880.
If BTC itself falls through support, it could push deeper into the $10,800-$13,880 support zone. It is questionable whether BTC will fall below the $10,000 mark.
But if it did, how long could Bitcoin stay below $10,000?
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