3 key crypto price events to watch in the wake of the FTX and Alameda debacle

Up until the beginning of this week, Bitcoin (BTC) had seen record low volatility, giving altcoins enough room to paint some nice technical setups.

At the same time, on-chain data and technical analysis began to suggest that BTC was in the midst of carving out a bottom, and many analysts believed that brighter days lay ahead.

Fast forward to the present, and the spike in volatility the market experienced actually turned out to be a Black Swan event.

As you already know, FTX is kaput.

Alameda Research is kaput.

BlockFi has put a stop to withdrawals, citing an inability to “operate as usual,” so it is “ceasing client withdrawals as permitted under our terms,” ​​suggesting the company is also kaput.

The contagion is spreading, and the splinter from this Krakatoa-level event is bound to ripple through the entire crypto ecosystem.

At this point, it’s difficult to make a confident short-term investment thesis for assets just by looking at the chart, and the best thing uncertain investors can do is either stick to a time-tested plan or do nothing.

The most likely short-term outcome is that volatility will remain high, and crypto prices will continue to whip around for some time.

No one is comfortable focusing on the potential negative outcomes that lie ahead for the crypto sector and cryptocurrency prices, but it is the responsibility of every investor to consider the absolute worst outcomes and have a contingency plan in place.

That way, you won’t be alarmed when the crap really hits the fan.

Here are a few things you should keep an eye on in the coming days.

USDT/USD vs. USDC/USD

During high volatility events, stablecoins sometimes break their peg to the dollar. If it’s a wild FUD about Bitcoin being banned, hacked or dying, prices of stablecoins sometimes rise above $1.00 as traders seek shelter in assets pegged to the dollar.

During crypto black swan events, Tether (USDT) sometimes loses its dollar peg. It has happened a number of times in the past and usually, when the smoke clears, it regains the 1:1 stick.

On November 9, USDT/USD broke below its dollar peg, falling as low as $0.97 at one point, according to data from TradingView and Coinbase. While USDT fell below the peg, USD Coins (USDC) value rose to $1.01.

While we will not explore the unconfirmed reasons why there was dislocation between the two, the unsubstantiated rumors related to Tether and Alameda Research can easily be found on Twitter.

The important thing to note here is that panic can easily be triggered by false information, rumors and lies, so it doesn’t matter if the Alameda/Tether rumors are completely false.

If it spreads on social media and scares investors, they are going to act and in this case; many want or are in the process of flipping their USDT to USDC, BTC or other stablecoins.

Similar behavior was seen during the Terra and Celsius implosions. On May 12, USDC’s price rose from $1.00 to $1.06-$1.19, according to data from TradingView and KuCoin. On the same day, USDT’s value briefly fell to $0.98 and $0.94.

When the price is shifted and there are spreads across exchanges, it becomes expensive to make stablecoin conversions and the experience of switching from one to another or from an altcoin to a stablecoin can be unpleasant.

The USDT and USDC dollar peg is something worth keeping an eye on.

Bitcoin price expectations

The November 8 selloff finally pushed BTC’s price out of the 146-day range where the price fluctuated between $24,500 and $18,600.

This is a significant range break and from a technical analysis point of view, failure to recover this area and increased selling could see the price break through the volume profile gap to find support in the $11,000-$12,000 range.

Unpleasant, yes, but that’s just the current reality.

If Bitcoin is able to recover and hold the $18,000 handle, at least the price will go back to the previous range and that would be a good sign.

A glance at the Ether (ETH) chart reflects a similar setup where ETH broke out of a 148-day range between $2,000 and $1,250, but the price has already regained the previous range.

Bearish traders have a downside target in the $700 area, but it is interesting to see how the price has bounced back to trade back around $1,250.

Related: Genesis Trading reveals $175 million in funds are locked up in FTX

The market is looking for firmer footing

Many crypto-focused companies and investment groups have exposure to FTX and Alameda research, which also means those same companies now have some holes in their own balance sheets.

Companies with exposure to #FTX

-Sequoia Capital – exposure of $213.5 million
-Galaxy Digital – $77 million exposure
-Crypto.com – Less than $10 million
-Amber Group – 10% funds
-Kraken – exposure to 9000 FTT
-Multicoin Capital – 10% funds
-Selini Capital – 3% of their funds

— Being Satoshi (@BeingSatoshi) 10 November 2022

A handful of these crypto-native companies also have sizable bags of various altcoins and decentralized finance (DeFi) tokens. In order to save the current losses, profit from their own loans and fulfill their customer obligations, it is possible that a number of these BTC, altcoin and DeFi token holdings could find their way to be marketed on spot exchanges.

Altcoins are already badly down, and some are relatively illiquid, meaning that a sharp increase in sales could put strong downward pressure on the price.

Before buying what looks like a once-in-a-lifetime dip and cycle bottom, investors should dig around and look into who some of the majority owners of the token/project are and remember that FTX’s multi-billion-dollar implosion is not yet marked throughout the sector.

Now is the time to research and do your due diligence before investing in any cryptocurrency.

This newsletter was written by Big Smokey, the author of The Humble Pontificator Substack and resident newsletter writer at Cointelegraph. Every Friday, Big Smokey will write market insights, trending how-tos, analysis and early research on potential new trends within the crypto market.