Crypto News: What is happening in the World of Cryptocurrency? – Forbes Advisor Australia – Forbes

Crypto News: What is happening in the World of Cryptocurrency? – Forbes Advisor Australia – Forbes

Blockchain Crypto Market Technology
December 8, 2022 by Coinvasity
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The once vibrant Solana ecosystem is getting crushed by the FTX and Alameda Implosion. The fall of these crypto titans has sent shockwaves through the crypto industry since the beginning of the month, with victims of the liquidity crisis continuing to surface weeks after the incident. While the entire crypto market has not fared well in the wake of the catastrophe, Solana and Solana-based projects have been affected drastically.
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Since Solana’s inception in 2020, FTX and Alameda Research have been tightly intertwined with the project. The pair were staunch supporters of the Solana blockchain and were instrumental in helping the project gain traction in the crypto space. The native token SOL was one of Alameda’s largest holdings, so the ecosystem’s success would have directly impacted Alameda’s portfolio value, explaining the support. 
This connection between the fallen giants and Solana explains why the ecosystem has suffered so badly these past few weeks. Over the course of the FTX and Alameda saga, the price of Solana’s native token, SOL, dropped almost 70%. Large entities like Tether have been moving crypto from the Solana chain onto other chains to reduce their exposure if anything happens to the project. The total value of all assets on the chain has dropped over 70%, falling from just under $US1 billion to just $US280 million in just 20 days.  
On the same day FTX stopped processing withdrawals, Solana processed almost 10 times the usual daily volume. NFT volume also exploded as investors rushed to sell off their digital pictures stored on Solana. This spike in activity was due to investors trying to sell any Solana-based tokens and move their assets onto other chains they deemed to be less risky.
Investing in any cryptocurrency comes with risks, and Solana is no exception. While the low price may seem like a bargain, multiple important factors must be considered before thinking about parting with your hard-earned cash. Alameda’s remaining portfolio balances are a major unknown catalyst for further price falls. There is speculation that Alameda’s holdings of SOL are still valued in the hundreds of millions of dollars. If forced to liquidate their assets, the selling pressure could tank the SOL token’s price even further.
It is also worth considering the long-lasting impact of the situation on Solana users and investors. The fallout from FTX has sparked fear in the hearts of Solana supporters, hence the drastic price drop, total value and activity of the ecosystem. The extent of the damage to investor confidence in Solana over the long term still remains largely unknown. As time goes on, investors may regain confidence and return to the ecosystem, but evidence for this has yet to be seen. 
Before the FTX implosion, the future was looking bright for Solana. The blockchain offered fast and cheap transactions, which was especially appealing to smaller investors, as well as gaming and metaverse projects which required high volumes of transactions. The volume of crypto traded on Solana had also been growing steadily throughout the year despite the overall market downturn, showing that the project had found a product-market fit with certain users. 
Although the future currently looks uncertain for Solana, there is the possibility for the project to rebound if it can get through the FTX implosion. Depending on the outcome, some unknown factors could affect the SOL token price negatively, so investors should consider all the risks before investing. It is never a good idea to dive into a project just because it is “cheap” because, after all, the price has usually fallen for a reason.
The turmoil following the FTX and Alameda implosion has been reflected in the poor performance of crypto markets this past week. Investor confidence is at extremely low levels, with the “Crypto Fear and Greed Index” hovering around the “Extreme Fear” level for the past month. Bitcoin and Ethereum started the week with a fall of 8% and 12%, respectively.
However, despite low buy volume, both assets have rebounded slightly. As of Nov 25, Bitcoin was trading at $16,524.09 while ETH was at $1,187.35, according to CoinMarketCap.
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The FTX and Alameda contagion is still continuing to spread, with several other crypto exchanges and projects facing a liquidity crunch. More exchanges and platforms have now been added to the list of casualties, with Liquid, SALT, Genesis Trading and Gemini all halting trading or withdrawals for some or all accounts. Genesis Trading, a subsidiary of Digital Currency Group, has hinted that bankruptcy could be a possibility if they did not receive help from creditors to resolve their liquidity crisis.
Sister company to Genesis Trading, Grayscale, which manages GBTC, has reported that they are unaffected by the situation. However, the shaky market and the lack of clarity has still put fear into the heart of some investors. The fearful sentiment reflects the level of uncertainty for the future as more and more businesses appear to have been affected. The precarious feeling of the crypto market sheds light on the past week’s poor price performance and gives reason for the lack of demand from crypto investors. 
To make matters worse, the FTX “hacker” who allegedly hacked the FTX platform for around $400 million in users’ cryptocurrency deposits has been selling off huge amounts of stolen coins. Most of the crypto was withdrawn in ETH, with the hacker selling off 50,000 ETH for Bitcoin, worth $60 million. Following this, blockchain data shows the hacker moving 15,000 ETH blocks, worth around $18 million, to different wallets. This has sparked further fears the account will dump even more ETH, driving the price down further. In total, the hacker has 180,000 split across 12 different addresses, and is in the top 40 largest ETH holders.
Despite the market turmoil, many die-hard crypto investors think this could be a great opportunity to purchase digital assets at a discount. However, seasoned investors know that it is never a good idea to try and catch a “falling knife”, and entering the market now comes with extreme risks. It is advisable to think twice before throwing any hard-earned cash at these volatile assets at present.
The state of the crypto market indicates that there could be further downside as more exchanges and businesses in the industry announce their losses from the FTX and Alameda meltdown. Regulators have indicated that regulation is coming to the crypto industry, potentially driving the markets even lower if it is seen as overly harsh. These two unknown factors make “buying the dip” a risky business presently, and the global economic situation does not appear to be helping to drive demand either.
The catastrophic meltdown of crypto titans FTX and Alameda Research has rocked the cryptocurrency world over the past fortnight. The rumour that the pair had blurred the lines between user deposits and their investments soon became a cascade of events that sent shockwaves through the industry. Bitcoin and other cryptocurrencies have been sent into a downward spiral following the implosion, earning November 2022 a place in the history books as one of the worst months in crypto’s history.
But, what really caused the downfall of FTX, what has the impact been and why is Bitcoin falling?
The final quarter of 2021 proved to be the beginning of what has turned out to be a savage downtrend for Bitcoin and crypto markets ever since. Despite reaching an eye-watering US$69,000 almost precisely one year ago, Bitcoin sits nearly 75% down from its record high. The entire cryptocurrency market peaked at a total value of $US3 trillion at around the same time in November of last year but has shed almost $US2.2 billion in value over the past year.
2022 has proven to be a challenging year for investors globally, with both Russia’s invasion of Ukraine and massive fiscal stimulus by governments during Covid-19 lockdowns, causing high inflation for countries worldwide. To drive down the inflation rate to acceptable levels, central banks have raised interest rates, negatively impacting investment markets, such as stocks and crypto.
Since the start of the year, cryptocurrencies across the board have generally trended downward in value, exposing vulnerabilities for some players in the industry. The Terra Luna collapse in May caused significant fallout for the entire crypto space, wiping out almost $US60 billion from the crypto markets in a matter of days. Numerous companies were directly affected; most notably, Celsius, Voyager and 3 Arrows Capital filed for bankruptcy following the incident.
By October, the crypto markets had finally begun to shake the dust off from the Terra collapse, and the space seemed to be moving in a positive direction. However, on November 2nd 2022, CoinDesk ended the brief moment of tranquillity by revealing that giants FTX and Alameda Research appeared to have put themselves in a risky position. A cascade of events soon followed, creating mass hysteria in the world of crypto and tanking the price of Bitcoin as investors panic-sold their assets to rescue any money they had left.
Sam Bankman-Fried, more commonly known as SBF, is a crypto mogul known for founding exchange giant FTX and quantitative trading firm, Alameda Research. CoinDesk revealed that while Alameda Research and FTX were supposedly separate companies, the balance sheets of these companies had become intertwined. The holdings of Alameda Research were dominated by FTX’s token, denoted by the ticker symbol FTT.
Several days after this information surfaced, a rival exchange and investor in FTX, Binance, announced they would sell all remaining FTT holdings, amounting to $US580 million. Naturally, the price of the FTT token plummeted following the news. This price drop caused immediate panic among FTX users, and a ‘bank run’ on the exchange ensued. After only $US4.5 billion in crypto assets had been removed from the FTX platform, withdrawals stopped being processed without warning.
This situation left $US10 billion of user funds trapped on the exchange, potentially affecting millions of users. Fearing the worst, some affected crypto investors began selling whatever assets they had remaining to get out of the market, causing a rapid fall in Bitcoin and cryptocurrencies across the board. Rival exchange Binance briefly stepped in, offering to buy out FTX and fulfil their liabilities; however, after less than a day of due diligence, they announced the issues were beyond their “ability to help”.
After this, Chinese crypto-mogul and founder of TRON, Justin Sun, offered to back any FTX deposits of TRON-based tokens. Seeing a way out, users instantly flocked to buy the Sun-backed tokens and withdraw, pushing the price up on the platform by almost 50 times the original. Of course, when withdrawn, this meant taking an immediate loss of up to 99%. Many FTX users decided that taking this loss was better than leaving assets on the exchange.
FTX has since filed for bankruptcy, both in Australia and overseas, suffered an alleged hack for almost $US1 billion in user funds, and is now being investigated by the Bahamian Government for criminal misconduct. Quite the downfall indeed.
The collapse of SBF’s empire has widespread consequences for the crypto industry. FTX and Alameda Research were seen as industry powerhouses and had investments or liabilities with many companies in the space. Other companies affected by the FTX collapse have already started coming forward, pausing user withdrawals from the platform while they determine the extent of the damage.
Aside from the direct impact of FTX’s dealings with other companies, there has also been a degree of mass hysteria and panic. Some crypto investors have all but lost faith in centralised platforms and exchanges, and are frantically withdrawing every penny they can from their accounts. Massive outflows from exchanges show the extent of this loss of trust, with over $US3.7 billion worth of Bitcoin being removed from exchanges, along with billions of dollars in other currencies.
Some users may have been so shaken by the disaster that they may decide to sell their assets and leave the crypto space entirely. The plunge in prices across many crypto assets suggests this could be a distinct possibility and could be one of the reasons why Bitcoin is falling. However, despite the negative impacts of the past week, there are some positive takeaways.
A key takeaway will be the need for improved regulation for centralised crypto exchanges to ensure the proper management of users’ funds. SBF was presenting the case to regulators that proposed a light touch, benefitting FTX and most severely affecting rivals and decentralised financial applications.
Another critical realisation for crypto investors is that centralised platforms are not necessarily the safest places to store crypto: those who chose to keep their crypto assets in their wallets were unaffected by the past week’s events and still have access to their cryptocurrencies. Some may be so scarred by FTX’s collapse that they opt for this storage method in the future. In any case, watch this space.
This article is not an endorsement of any particular cryptocurrency, broker or exchange nor does it constitute a recommendation of cryptocurrency as an investment class.

Patrick McGimpsey is a freelance writer passionate about crypto and its impact on the financial world. Currently working as the content lead for Australian startup CryptoTaxCalculator, Patrick has also covered the crypto industry for Canstar and The Chainsaw. Patrick has over seven years of experience in the crypto space and has previously shared his knowledge with the AML and fraud departments of Australian financial Institutions.

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