Recurring market commentary on what’s happening in the crypto markets, summarized by the Crypto Broker team at Crypto Finance AG.
Market commentary
Good Morning!
Bitcoin (BTC) is currently trading at the 19.75k price mark (-3.8% in 7 days) while Ethereum (ETH) fell back down and is getting traded at a price of 1.48k (-5.7% in 7 days). So much is currently going on in crypto. We also have the midterm elections, Fed members speaking, CPI numbers, and the inflation target, to name a few. We are living in some busy times.
FTX dragging down the market
Once again, the topics of credit risk and creditworthiness are on the table. Rumors are spreading about the FTX/Alameda situation. Truth be told, I was always a bit concerned about how Alameda Research was tied to FTX much too closely. To be specific, something that I really never liked was that Alameda, as a “Principal Trading Firm”, is the one of the biggest market makers in FTX, and is extremely involved in many different projects (i.e., Solana). In my opinion, it's as if Citadel would be owned by CME. That would be crazy, right?
Sam Bankman-Fried was once admired as the king of crypto.
Now Alameda and FTX are rumoured to be on the brink of insolvency.
🧵: Here's how it all went wrong for SBF and FTX. 👇
— Miles Deutscher (@milesdeutscher) November 7, 2022
Nevertheless, if FTX has not been "playing around" with client holdings (the way Celsius or Voyager did), I am not worried about the solvency of its platform. Having said that, though, as it is very likely that Alameda has many loans backed in FTT, which probably are locked and/or hard to easily liquidate, they implicitly have a trigger price and a “margin call”. If Alameda becomes insolvent, we might not only see a reduction in liquidity at FTX.com but the crypto space in general will suffer a lot. Sidenote: I am not expecting Alameda to show their balance sheet or the full list of holdings and positions.
FTT in trouble
As concerns started arising, many stopped lending out their tokens, causing the borrowing rates to increase. The always beloved FTX’s margining system is now under a magnifying glass. What if suddenly everyone stops lending? Borrowing rate spikes and margin calls should close the positions of the borrowers. I am curious to see the effect that this will have on the market, as many players used to borrow funds on FTX – typically at a lower rate than other DeFi protocols – to then stake/farm/etc. those assets on other platforms at higher rates. This is a systematic risk. You can check out the rates at Leding.tools and FTXPremium.
So far the USD lending rate is at 5% (slightly above the 4% Fed target rate, which is reasonable), but USD lending on FTX went from $2.5 billion on November 6, to $1.1 billion as of now. The ETH lending rate jumped to 10% from the historical average of 2.53%, as the number of tokens lent went from 400k to 170k. And also the AXS lending rate jumped to 500% from historical average of 66%. In the terms of the crypto market in general and the prices buying FTT, SOL, and all the “Alameda Coins” is nothing else than a bet. In case of clarification from Alameda, I can easily see FTT above 22 (now it’s trading at 18.03).
Happy Trading!
All intellectual property, proprietary and other rights and interests in this publication and the subject matter hereof are owned by Crypto Broker AG including, without limitation, all registered design, copyright, trademark and service mark rights.
Disclaimer
This publication provided by Crypto Broker AG, a corporate entity registered under Swiss law, is published for information purposes only. This publication shall not constitute any investment advice respectively does not constitute an offer, solicitation or recommendation to acquire or dispose of any investment or to engage in any other transaction. This publication is not intended for solicitation purposes but only for use as general information. All descriptions, examples and calculations contained in this publication are for illustrative purposes only. While reasonable care has been taken in the preparation of this publication to provide details that are accurate and not misleading at the time of publication, Crypto Broker AG (a) does not make any representations or warranties regarding the information contained herein, whether express or implied, including without limitation any implied warranty of merchantability or fitness for a particular purpose or any warranty with respect to the accuracy, correctness, quality, completeness or timeliness of such information, and (b) shall not be responsible or liable for any third party’s use of any information contained herein under any circumstances, including, without limitation, in connection with actual trading or otherwise or for any errors or omissions contained in this publication.
Risk disclosure
Investments in virtual currencies are high-risk investments with the risk of total loss of the investment and you should not invest in virtual currencies unless you understand and can bear the risks involved with such investments. No information provided in this publication shall constitute investment advice. Crypto Broker AG excludes its liability for any losses arising from the use of, or reliance on, information provided in this publication.
