Crypto Ecosystem

Could FTX’s potential selloff move crypto markets?

, September 15, 2023

In this week’s crypto highlights, we explore the price movements of BTC, MATIC, XRP, and APE. Additionally, this recap includes other notable industry news items that occurred over the last seven days. Without further ado, let’s dive into the latest market developments.

Noteworthy market events

FTX arguably scared crypto markets, after sharing its crypto holdings

According to recently filed restructuring documents, FTX holds $3.4 billion in crypto assets. They include $1.16 billion in SOL, $560 million in BTC, $192 million in ETH, and the rest in other digital assets. In these documents, the platform stated that it is seeking approvals from the court to sell these crypto assets, and on September 13 the platform received it. 

This sparked speculation that FTX could dump its portfolio this week, causing a selloff on crypto markets. For instance, Matrixport published an article titled “The altcoin crash is coming,” warning that a selloff could snowball with the FTX’s selling of its portfolio. As a result, Bitcoin temporarily dropped to $25,000, while various altcoins, including SOL, moved to the red zone.

A big “But”

FTX asked the court for permission to sell $100 million worth of coins and tokens weekly, with the amount potentially increasing to $200 million (and that’s the maximum). The platform indicated it wants to minimize market disruption, while also maximizing returns for its defrauded customers.

In addition, a portion of FTX’s holdings are staked and locked for the next few years. For instance, a significant amount of the platform’s SOL funds are bound by a linear vesting schedule, spanning from 2025 to 2027. Although FTX’s portfolio sellings could increase selling pressure on crypto markets, they are unlikely to cause an immediate flash crash. 

This situation slightly resembles a previous one with Celsius. In June 2023, the platform received a green light from a judge to convert its altcoin holdings to BTC and ETH. There were concerns that these liquidations could pressure altcoin markets. But a few days after Celsius moved the assets reportedly prepared for selling, there were almost no significant price fluctuations for said assets, as a major portion of transactions happened over the counter (OTC).

Nevertheless, FTX’s potential scale of one-time sellings could be several times larger than Celsius’. As a result, there is still room for increased price volatility.

ArkInvest and 21Shares applied to launch the first spot Ethereum ETF in the U.S.

Asset managers ArkInvest and 21Shares submitted an application to the U.S. Securities and Exchange Commission (SEC), seeking regulatory approval for their Ark 21Shares Ethereum ETF. If approved, this would be the first Ether-based ETF available in the U.S. with direct exposure to ETH. 

Essentially, Ark Invest’s proposed ETF mirrors the applications for spot Bitcoin ETFs. Coinbase has been named as the custodian, while trading of the ETF itself is planned to take place on the Cboe BZX Exchange. VanEck also filed for a spot Ethereum ETF with Cboe BZX Exchange, but didn’t disclose the name of its custodian.

CFTC takes actions against DeFi protocols Opyn, ZeroEx, and Deridex

In a statement released on September 8, the U.S. Commodity Futures Trading Commission (CFTC) announced that it had issued orders against Opyn, ZeroEx, and Deridex, accusing them of failing to register various derivatives trading offerings. 

These three projects faced several accusations of utilizing blockchain-based protocols and smart contracts to function as trading platforms, according to the CFTC. The U.S. derivatives regulator ordered Opyn, ZeroEx, and Deridex to cease the violations and pay fines of $250,000, $200,000, and $100,000, respectively. The companies agreed to settle the charges. 

Some experts believe this case may pave the way for a more stringent DeFi regulatory environment in the U.S. 

FASB says crypto assets should be marked at current values

The Financial Accounting Standards Board (FASB) voted in favor of using “fair value” accounting to report crypto assets. The rules will go into effect in 2025, but U.S. companies can start using fair-value accounting immediately if they choose to do so. The FASB, which is a non-governmental standard-setting board overseen by the SEC, proposed the rule in March 2023.

Previously, U.S. companies were obligated to report and retain impairment losses from cryptocurrencies on their balance sheets, even after prices rebounded. Under the new rules, they are permitted to value their crypto assets based on market prices.

There has been speculation that the change could convince more U.S. companies to add Bitcoin to their treasuries. For instance, MicroStrategy Chairman Michael Saylor stated that this could boost corporate adoption of BTC.

One sentence news

  • MetaMask announced the start of open beta testing of its Snaps protocol, aimed at allowing users to interact with different blockchains and third-party applications inside the MetaMask wallet.
  • Crypto exchange CoinEx faced a hack, resulting in over $40 million in losses.
  • According to a court filing, FTX demands that LayerZero Labs return $86 million, as it allegedly exploited Alameda Research’s precarious financial situation. 
  • PayPal launched a service for converting cryptocurrencies into U.S. dollars, ​​enabling two-way conversion — both on and off-ramp payments.

Bitcoin arguably formed a Double Top pattern

A few weeks ago, we mentioned that Bitcoin formed a sloping Head and Shoulders pattern, with $21,500 as a potential target. Recent market performance inspired the crypto community that another bearish pattern might be formed — Double Top (white curves). Considering its height, the pattern’s target could be around $20,000.

Furthermore, the asset formed a death cross on a daily chart, or a crossover of 50-day and 200-day SMAs. The last time this happened was January 2022, and the bearish market was at its early stages. The recent price consolidation moved Bitcoin out of the oversold zone with RSI, indicating that there is still downward potential. In other words, bulls had their chance for a price recovery, but they didn’t have enough movement to push the asset upward, suggesting that bears still put significant pressure on the market.

The $25,000 level acts as a crucial support area, which could define whether or not the Double Top pattern is confirmed. It also corresponds to the 200-week EMA, another major dynamic support level. If the asset fails to sustain above $25,000, this could potentially accelerate bearish pressure. If successful, the asset may try to retest the $27,250 level.

MATIC price hit a new 2023 low

South Korea’s largest financial group, Mirae Asset Securities, teamed up with Polygon Labs to develop a tokenized securities network. However, this news didn’t help the MATIC price. Instead, the asset updated its 2023 low, shortly after Binance announced that it will discontinue support for Polygon assets on its NFT Marketplace.

The asset formed a bullish divergence with RSI, suggesting the price rebound could follow. The 20-day EMA is acting as a dynamic resistance level for the MATIC price. If the price breaks it, it could help bulls retest the $0.60 level, and the 50-day SMA. If failed, this would indicate that bears continue dominating the market, and may reestablish downward movement.

XRP price slid following the SEC move

Recently, Ripple announced the acquisition of crypto custodian Fortress Trust. However, price performance was primarily affected by the SEC’s decision to counter Ripple in an effort to appeal the XRP ruling. This moved the asset below the psychological level of $0.50, breaking the 200-week EMA and an almost year-long support line.

Over the last two months, the XRP price essentially wiped out all gains earned, after Ripple’s victory against the SEC regarding the XRP status. Weekly RSI moved to negative territory, while MACD experienced a bearish crossover, suggesting that downward movement has the potential to maintain.

APE is preparing for a major token unlock

ApeCoin has already unlocked 50% of its token supply, but the remaining vesting schedule could compound the challenges for APE holders. According to TokenUnlocks, the next unlock will take place on September 17 (white line), releasing 40.6 million APE, or about 11% of the circulating supply. 

For comparison, the previous event (grey line) accounted for 4.23% of the circulating supply, and was considered one of the major catalysts behind a price drop of over 20%. As a result, although the price is continuing to update its all-time lows, and the asset is already in the oversold zone, bearish momentum is likely to remain strong.

Tune in next week, and every week, for the latest CEX.IO crypto highlights. For more information, head over to the Exchange to check current prices, or stop by CEX.IO University to continue expanding your crypto knowledge.

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Disclaimer: For information purposes only. Not investment or financial advice. Seek professional advice. Digital assets involve risk. Do your own research.

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