Days after one of the biggest crypto meltdowns ever, thanks in large part to the collapse of FTX and the shocking revelations exposing Sam Bankman-Fried, until recently the darling of the establishment on all things crypto, now universally reviled as the head of a massive Ponzi scheme — and it appears that hodlers are finally heeding old wisdom.
So, are we about to see a tightening up, reducing volatility in the crypto markets, or can we expect some movement one way or the other soon?
The amount of crypto which has flooded off exchanges in the past few days has been enormous, with around $3B flooding out of exchanges in the week following the announcement of FTX’s insolvency.
The fall of the one much-lauded empire of SBF sent seismic shockwaves through the crypto industry, with major coins dumping to two-year lows — which, after an already devastating year for the crypto industry, was absolutely not what we wanted to see.
Much of the withdrawals appeared to be heading into non-custodial wallets, as users seemed to be finally getting the message that holding your tokens on a centralised exchange means it’s not really your crypto.
The contagion spread quickly, as huge industry players started to freeze withdrawals in light of the debacle, including BlockFi, Gemini and OKX, and even Coinbase halting withdrawals for a time.
For followers of volatility, this news provided some relief, as it very much looked like crypto holders were hunkering down in their bunkers, and volatility over the last few days fell, seeing Bitcoin’s price ranging in a tight $500 spread, or roughly around a 3% baseline.
In many ways, this is a good sign for those bullish on Bitcoin, as it suggests that peak capitulation may have been reached, and there’s been some speculation that users were simply sitting out and waiting to see what happened next.
It’s not as though moving into fiat at this point was a palatable move either, as the dollar continues to be under pressure through raging inflation, and with the current US Administration seemingly embroiled in the whole FTX scandal.
Allegations that FTX was running an enormous circle-jerk (read money-laundering scheme) benefitting the ruling Democrat party are in full swing, and even the chair of the regulator, the SEC, seemed to be caught up in it — and there’s nothing like a bit of bribery and corruption at the highest levels to knock investor confidence.
All in all, it reads like the plot of a thriller novel, and crypto enthusiasts, it seemed, well, certainly the ones left in the game, were heading for the hills clutching their coins as tightly as they could.
It seemed as if we might be in for a period of relative calm, but maybe we were just experiencing a lull in the eye of the hurricane. Over the last 24 hours, the world’s biggest exchange Binance has seen massive inflows of Bitcoin, the largest one-day volume spike for over a year.
This means that Binance’s reserves of Bitcoin are now higher than they were before FTX went tits-up.
That said, it might be that Binance is simply riding the wave of holders exiting other exchanges and looking for a new “safer” home. Indeed, CEO Changpeng Zhao (CZ) was arguably one of the catalysts who seemed to spark the collapse of FTX, and he has this week floated the idea of exchanges posting Proof of Reserve data to demonstrate their transparency and soothe investor nerves. If only the Central Banks could do the same…!
At the time of writing, the current inflows of the number 1 crypto are over 138,000 BTC and this could signal a massive sell-off coming soon, with the possibility of Bitcoin dropping to around the $12K — $13K mark according to some analysts.
It’s worth noting however that there’s a reason there exists both bull and bear thesis. Back in March of last year, the same commentator was targeting between $250K-500K, so as always, take what people say on Twitter with a grain of salt.
Although Bitcoin’s volatility index is sitting tight at around 4.1%, this is still the highest level its been since July 2022, and another significant event could see this moving higher.
As always, it’s impossible to say what happens next, and this is exactly why we’re building Bumper, a crypto price protection protocol which saves your wallet from getting rekt in the event of market crashes and downside volatility (whilst still allowing you to enjoy the upside gains).
Bumper lets you sleep easily, knowing that downside moves won’t be spoiling your day if you’ve protected your crypto using our novel DeFi protocol.
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