CRYPTO week ahead: November 14 – 20

2022年11月14日Last week in the news

Last week`s downturn on the crypto market was under strong influence of negative developments with FTX cryptocurrency exchange, which filed for bankruptcy as of the end of the week. Bitcoin finished the week above 16K, while Ether manages to hold above $1.250 support.

The dust about FTX cryptocurrency exchange began at the beginning of the previous week, with news that Binance exchange is considering to take over the FTX exchange, which was struggling with liquidity for some time. After Binance officially announced that the company does not have intention to buy the FTX, the clients of FTX started withdrawing funds pushing the exchanger into significant problems. Within a few days, one of the largest exchangers on the market, with a valuation of $32 billion, filed for bankruptcy. Voluntary proceedings currently include approximately 130 affiliated companies. Market reaction was swift and negative as nobody can tell with certainty all the potential future effects of FTX`s bankruptcy. As CNBC is reporting, the FTX has more than 100.000 creditors, and liabilities above $10 billion. While FTX clients and creditors are concerned whether they will be able to withdraw their funds any time soon, the regulators are voicing a need for the crypto market regulation.

The JPMorgan research team noted last week in a letter to clients, a significant increase in deleveraging of the crypto market, caused by the collapse of the FTX exchange. They are implying a high probability of the cascade of the margin calls, similar to the one already occurred with the collapse of Terra. In this sense, the Bank is noting probable BTC bottoming around 15K, with some probability for 13K to be reached.

Cathie Wood continues to be optimistic about the crypto market in the long run. Her company, ARK Investment ETF, used the current market downturn to increase the number of shares of Coinbase, by purchasing additional 400.000 shares. At the same time, Coinbase stated that it has only small exposure toward the FTX in terms of operating deposit.

Equity markets in the US performed in green during the previous week, after the official US inflation figures were published. The inflation reached 7,7% on a yearly basis, which was lower from the forecasted 8%. Figures are showing that FED's rate increases during the previous period are finally reflecting in the economy, and slowing the inflation. This has increased investors' confidence that the FED might start easing further measures to cope inflation, including slowdown in future rate increases.

Crypto market cap

For one more time the crypto market exposed its worst weakens, which is called liquidity. The fragility of the market this time was triggered by the bankruptcy of one of the largest crypto exchanger FTX. When the news hit the market, significant number of its clients were trying to withdraw funds, bringing FTX further to the down side. The spiral then continued to the point where FTX needed to halt its operations, further worsening the clients sentiment. As FTX is a large company with significant relations with other entities within the crypto ecosystem, the current panic among crypto participants is caused by lack of information if FTX`s collapse would impact the downturn of any other crypto company or exchanger. To be on a safe side – traders and investors are closing their positions. In addition, there is significant leverage on the crypto market, hence, margin calls will be the ones which will most certainly push the prices more to the downside. Total crypto market capitalization was down by 20% on a weekly basis, where more than 200B was wiped out. Major coins on the market, BTC, ETH and BNB participated with 69% in total drop. Daily trading volumes remained on a relatively same level as week before, moving around 152B on a daily basis. Total funds outflow from the beginning of this year widened to the level of 2.182B, which is a decrease of 63% on a yearly basis.

There is no coin on the crypto market that finished the week in green. The highest losers in absolute terms were the major coins on the market. BTC`s total market cap was down by more than 20% on a weekly basis, decreasing its cap by almost 85B. BTC was followed by ETH, with a drop of 22% or 44B. Third place belongs to BNB, with a decrease in market cap by almost 11B or 19%. Solana was another coin with significant drop of 77B or almost 57% within a single week. XRP had a drop of more than 66B, which is a decrease of 26%. DOGE also lost significant amount of funds of almost 55B, bringing a decrease to 28%. All other altcoins lost between 10% up to 30% in value within a single week. Considering coins in circulation, Tether lost some 2.8% , while Solana and Filecoin increased their circulating coins by 0.9% both.


Crypto futures market

Considering significant negative news during the previous week, the crypto futures market could not perform better from the spot market. Both BTC and ETH futures were traded significantly lower from the week before, with higher drop within shorter maturities.

BTC short term futures were traded some 25% lower during the week, with December this year ending the week at level of 15.6K. Longer term futures were traded down by some 12%, where December 2023 dropped below 20K and ended the week around 18.6K.

ETH short term futures were also down by 25% on average, same as BTC, where the price for December this year was closed modestly above 1.2K. On the other side, longer term ETH futures had higher drop from BTC`s, bringing down prices by some 15% on average. There has been a significant drop in prices for December 2023, where these futures ended the week holding at 1.3K.