FTX and Binance are out on the warpath

There is a conflict brewing between the CEOs of crypto exchanges FTX and Binance, which has already been dealt with in our previous article. In a nutshell: rumours have surfaced online that Alameda Research, a company closely associated with FTX CEO Sam Bankman-Friede and the exchange’s native token called FTX, could allegedly be financially insolvent.

FTX CEO Sam Bankman-Fried and Binance CEO Changpen Zhao

The cryptocurrency community has succumbed to panic as the bearish trend has taught its lesson - even big business giants like Three Arrows Capital can fall overnight and drag the entire market down with them.

Alameda Research’s financial report leaked online talks about the large amount of FTT on its balance sheet. This is a native FTX token, which suggests the prospect of a collapse of the exchange following Alameda Research in a worst-case scenario. In the wake of the recent information, Binance chief executive Changpen Zhao publicly announced that his exchange was getting rid of all FTTs in their holdings. This has caused a significant drop in the altcoin exchange rate.

FTT exchange rate on a 1-hour chart scale

According to Cointelegraph sources, Bitcoin’s exchange rate also rolled down amid this news. The major cryptocurrency is trading around $19,750 this morning.

BTC exchange rate on the scale of the 1-hour chart

The collapse of FTX could cause another major drop of several thousand dollars in BTC, but it’s unlikely that the exchange’s management will allow that to happen. Yet not so long ago Bankman-Fried confirmed that the company’s earnings in 2021 on the background of the bull market was the equivalent of one billion dollars. Which means the company clearly has reserves.

Inflation back in focus

The US Federal Reserve was in the spotlight last week in October – then there was talk of another 0.75 per cent rise in the benchmark lending rate. This week, markets will be watching for another key indicator – the Consumer Price Index (CPI) data for October.

Economists surveyed by Bloomberg estimate annual inflation at 7.9 per cent, down 0.3 per cent from September.

Expected U.S. inflation data

Any value lower from the expected CPI index could be favourable for crypto. Still, it increases the odds that the Fed will back off from a more serious rate hike in the near future.

However, before CPI and jobless claims – another important indicator of the economy’s health – are released, we need to “prepare” for the US midterm election results. The fact is that such a major political event can in itself be a source of instability in the markets.

In such a situation, a trader under the nickname CryptoGodJohn advises to refrain from opening positions for the time being. Here is his rejoinder.

Conflict between Zhao and Bankman-Freed, midterm elections, CPI data. It’s going to be a big week for crypto, which will determine the market sentiment for the rest of this year.

Indeed, the rate at which the price rises or falls on the charts can be high, and this creates additional problems for those who trade with leverage.

Rising rates on fundings

According to CryptoQuant analyst under the nickname Maartunn, the fundings payout rate has reached its highest in the last six months. As a reminder, fundings are periodic payments to holders of short or long positions from the opposite side of trades in leveraged trading. Funding is needed to ensure that the price of perpetual BTC futures does not deviate too much from the spot price of the cryptocurrency.

Dynamics of the Funding Rate

High fundings rates indicate that the market expects the value of Bitcoin to rise and that holders of long positions or longs are paying relatively heavily to holders of short positions, i.e. shorts. This effect may lead to undesirable consequences for bulls, as a significant decline in the value of BTC will cause many of their positions to be liquidated. This is how the expert comments.

And at the moment, the stakes for fundings are very high. Traders are waiting for prices to rise and are willing to pay serious interest. This is not necessarily a bearish sign, but when the price starts moving down, the bulls might be forced out of their positions, or they will be liquidated.

In other words, today’s collapse of BTC below $20,000 has made significant adjustments to the plans of those who were waiting for local growth to develop. One more such wave of decline – and massive liquidation of longs will start in Bitcoin trading, which will drag the value of the cryptocurrency even lower. However, it is impossible to predict the market situation.

We believe that conditions for the cryptocurrency market are indeed challenging. However, bearish trends usually are, and it was no better in 2018. The real risk in this situation for the entire industry would be a possible collapse of a giant like Alameda. However, these experienced players are unlikely to decide to give up and will try to get out of the situation by any means possible.

For other important developments and indicators, check out our millionaires cryptochat. Subscribe.