Why has crypto crashed today?

Yesterday was a real black Tuesday for the crypto market, with a general collapse. 

However, at least as far as Bitcoin is concerned, the collapse did nothing more than bring the price back to the annual lows already touched in June. Moreover, the current price had already been touched in both September and October, so for now it is just continuing the long phase of lateralization that began in June. 

For other cryptocurrencies, however, the collapse has been more significant. 

Why has crypto crashed?

By far the main cause was the fear of a collapse of FTX. 

FTX is one of the world’s largest crypto exchanges, and yesterday it had problems with withdrawals. Indeed, at one point it had emerged that they had even been suspended, albeit only temporarily, while an official statement later made it known that the queue of outstanding withdrawals was dwindling. 

a: we want to thank our team for working tirelessly to process the backlog of withdrawals. See here for context:
https://t.co/fbg2ifBNzH

queue is decreasing and getting back to more reasonable levels; nodes and banks catching up

— FTX (@FTX_Official) November 8, 2022

This situation has caused a real collapse in the price of FTT, which is the token of FTX. 

Until the day before yesterday, its price had remained around $22, which is the price at which Alameda Research had pledged to buy any FTT tokens that might be sold by Binance. 

Yesterday, however, at some point the price of FTT dropped below $22, leading to the assumption that there were problems. 

As soon as it became known that withdrawals on FTX were temporarily suspended the price dropped to $14.6 within hours. 

At that point, Binance stepped in to help FTX, and the price was back above $19. But after a few minutes, the descent began again, which turned into a full-blown collapse within a few hours. 

In fact, not only did confirmation emerge that the CEO of FTX, Sam Bankman-Fried (SBF), had ordered withdrawals to be suspended, but the Coinbase website also went momentarily down, probably due to trivial congestion on their servers or network. 

All this generated real panic, which led to FTT losing 84% of its value in about three hours. In short, a real collapse. 

The rebound of the FTT token

Once it fell to $3, the price of FTT rebounded slightly, eventually rising again to $5 overnight. Its collapse then stopped at $3, for now, and looks likely to stabilize above $4. However, the problems for FTX may not be over, so it may not be able to hold this figure. 

Bitcoin’s price, after hitting a new annual low just above $17,000, had also rebounded all the way above $18,000. However, it then fell back below this figure again. 

At this time, it does not appear at all that these small rebounds are enough to declare this phase of declines over. 

Performance of the major coins

Among the major coins, it is not Bitcoin that is losing the most in the last 24 hours. 

BTC stops at a significant, but not abnormal, -9%, while ETH scores a -15%. 

In the top 10 cryptocurrencies with the largest market capitalization stands out ADA (Cardano), which is down only 6% in the last 24 hours, followed by BNB (Binance Coin) with -8%. 

XRP sees a -15%, while DOGE (Dogecoin) -17%. 

The one losing the most in this ranking is Polygon‘s MATIC, with -21%. 

Solana (SOL)

Taking into consideration also the altcoins that stand after the tenth position, the negative performance of SOL (Solana) stands out. 

It is losing as much as 38% compared to yesterday, and 45% compared to a week ago. 

However, it must be said that in the past few days it had risen more than the other major cryptocurrencies, thanks to a sequence of positive news. So it was starting from somewhat higher values. 

However, it cannot go unnoticed that right now its market value is as much as 93% below last year’s all-time high. 

According to some analysts, if it fails to hold the current price level, it could fall an additional 50%. 

Therefore, yesterday’s slump was across the board, and it may be continuing today, but it is affecting some cryptocurrencies much more than others. 

Indeed, there is even one that does not seem to be suffering this collapse as much. 

Tron (TRX): the most resilient altcoin of the moment

TRX is the cryptocurrency native to the Tron blockchain. 

Its current price is in line with that of 24 hours ago, and is only 2% lower than it was seven days ago. 

Although it is also 73% lower than its all-time high in January 2018, it does not seem to be taking a particular hit. 

Indeed, to be fair, its current price is still in line with that of January 2022, denoting a stability that none of the other major cryptocurrencies have. 

The reason may be that TRX is mostly used to pay transaction fees on the Tron network. For quite some time, many USDT (Tether) users have preferred to execute their transactions on the Tron network, as opposed to Ethereum or other networks. 

Tron allows for fast, but most importantly, very cheap USDT transactions. 

The fact that most USDT transactions now take place on the Tron network means that TRX is very much in use, since the fees for such transactions only ever have to be paid in TRX, even if the amounts are very small. 

USDT is not only the most widely used stablecoin in the world, it is also by far the most widely used token, with trading volumes exceeding even those of BTC and ETH. This is enough to generate a steady underlying usage of TRX that keeps buying pressure relatively high. 

The bear market: will the crypto slump be prolonged?

The current situation in crypto markets is not thriving, but it is perfectly in line with past cycles. If anything, for the time being, it is even slightly better. 

To date, three bear markets have occurred in the crypto markets following the bursting of large speculative bubbles. 

The first two have already ended, in late 2016 and late 2020, respectively, and both lasted more or less two years, or slightly less. The third is the current one and it started about a year ago, which was in the second half of November 2021 after Bitcoin reached a new all-time high at $69,000. 

It is worth noting that these cycles follow Bitcoin’s halving cycle, and the next halving will take place in 2024. Hence, everything suggests that the current bear market may last longer. 

However, what is perhaps most significant is that in both of the previous two post-bubble bear markets, Bitcoin’s price minimum peak was touched at -85% from the previous high. This year, on the other hand, so far the minimum peak has stopped at -75%, which seems to indicate that the current bear market is proportionately less violent than the past two. 

This of course applies to Bitcoin, but not to all altcoins. For example, the old LUNA 1.0 has virtually disappeared, and FTT has collapsed. But overall for now the current bear market still seems slightly milder than past ones. 

If a -85% from the highs were to be replicated again this time as Bitcoin’s lowest peak during the current bear market, its price would have to fall to around $11,500, a price that seems distant at present.