The crypto market is not doing well. And it may take on this sentiment for the whole week if not the whole month. As we navigate the volatile seas of the crypto market, it’s becoming increasingly clear that storm clouds are gathering on the horizon.
For both seasoned investors and newcomers alike, the tides have turned from the roaring waves of quick profits to the treacherous currents of substantial financial risks. Brace yourself: the choppy seas ahead could result in losses as colossal as the peaks that once promised riches.
Crypto markets see RED
The crypto market is preparing for a pivotal week, with several economic events and the impending FTX liquidation on the horizon. Experts anticipate a significant increase in crypto market volatility.
Monday’s crypto markets plummeted as traders became alarmed by the potential selling pressure from FTX’s bankruptcy. Bitcoin (BTC) fell more than 2% and momentarily dipped to as low as $24,963 during U.S. morning hours, marking the first time since mid-June that it fell below the $25,000 threshold.
BTC has since recouped a portion of these losses and is currently trading at around $25,140, down 2.6% in the last 24 hours. Ether (ETH), the second largest crypto asset by market cap, traded at $1,560, down 3.2% on the day.
Bitcoin was soaring not too long ago: an upsurge of spot Bitcoin exchange-traded fund applications, including one from the world’s largest asset manager, BlackRock, had investors optimistic that the U.S. Securities and Exchange Commission would eventually approve the long-awaited crypto product for Wall Street.
However, the chief regulator has been dragging its feet, and investors are still waiting, causing low liquidity in the crypto market and a general decline in interest, according to industry experts.
Altcoins take the hardest hit
Altcoins were not immune to the sell-off either. Alternative cryptocurrencies, or altcoins, are underperforming, topped by Solana’s SOL, which has dropped by more than 8%. Toncoin’s TON and layer 2 Arbitrum’s ARB fell by comparable percentages, while Ripple’s XRP fell by 5%.
The drop occurred as market players digested the potential of FTX obtaining a bankruptcy court order to sell assets from its $3.4 billion bitcoin holdings.
SOL is under the most pressure, as FTX owns $1.16 billion in that coin. According to on-chain data, this represents roughly 16% of the total supply.
The collapsed exchange also has $560 million in Bitcoin and hundreds of millions in lesser-known illiquid micro-cap tokens. FTX has already tapped into Galaxy, a digital asset investment firm, to help with the sales.
In addition to the FTX-SBF scandal, the industry has reacted to other projections championing the market crash. The EU’s growth is projected to reach 0.8% in 2023, a decrease from the previous estimate of 1%. The projections for 2024 have also been revised, falling from 1.7% to 1.4%.
Similarly, the altered growth rates for the eurozone in 2023 and 2024 have been reduced from 1.1% and 1.5% to 0.8% and 1.3%, respectively.
The European Commission is extremely concerned that Germany, a key player in the bloc, will experience a recession this year.
Wednesday’s release of the United States’ Core Consumer Price Index (CPI) figures is another important event this week. Excluding the fluctuating costs of food and energy, the Core CPI indicates a predicted annual decline.
When CPI figures outperform forecasts, they strengthen the USD, leading to a favorable trend. On the other hand, disappointing data could undermine the USD, resulting in a bearish forecast.
Arbitrum (ARB) falls to an all-time low
Arbitrum has emerged as a frontrunner among Ethereum’s layer-2 scalability solutions, sporting a substantial total value locked (TVL) and notable activity. However, between September 9 and September 11, the price of Arbitrum (ARB) tokens plummeted by 14.5%, signifying its all-time low.
Investors are now avidly seeking insight into the factors driving this movement and questioning whether Arbitrum still possesses a competitive advantage, given that the network TVL exceeds $1.6 billion regardless of the ARB token’s performance.
The absence of any instances of fraud-proof issuance since the launch of the Arbitrum mainnet in August 2021 is a potential cause for concern.
Additional factors that may help explain the recent price downturn are associated with governance proposals from Arbitrum’s decentralized autonomous organization (DAO). The first proposal, which was published on 2 September, seeks to allocate up to 75 million ARB tokens from the project’s treasury to address “short-term community needs” for active decentralized applications (DApps) within the ecosystem.
Nonetheless, even if approved, this allocation represents less than 2% of the DAO’s treasury holdings and is unlikely to have triggered the ARB token price correction, irrespective of one’s position on the proposal.
