and other cryptocurrencies looked vulnerable to declines on Tuesday, with the arrest of disgraced former FTX CEO Sam Bankman-Fried and worries over crypto exchange Binance underscoring weak confidence across the digital asset landscape.
The price of Bitcoin was trading higher, for now —up 2% over the past 24 hours to $17,400. The largest crypto remains down some 20% in just over a month following the shocking failure of exchange FTX, whose founder Bankman-Fried faces allegations of fraud, with Bitcoin changing hands at a quarter of its November 2021 record high.
“Bitcoin continues to trade around $17,000, undeterred by reports of Sam Bankman-Fried’s arrest and possible charges for money laundering against Binance,” said Craig Erlam, an analyst at broker Oanda.
Bankman-Fried was arrested by authorities in the Bahamas late Monday following receipt of a notice from the U.S. that it has filed criminal charges against him and is likely to request his extradition. The Securities and Exchange Commission on Tuesday also charged Bankman-Fried with “orchestrating a scheme to defraud equity investors in FTX.” It marks a stunning fall from grace for the former crypto executive, who was once one of the industry’s most respected and influential players.
The collapse of FTX in November marked the latest blow to the digital asset industry after what has already been one of its worst years ever. The bankruptcy of a trusted exchange has also raised scrutiny on rivals including Binance, the world’s largest crypto trading platform. Binance executives, including its founder and CEO, are reportedly at risk of criminal charges in the U.S., and customers have moved to rapidly pull funds from the exchange amid worries that it could befall the same fate as FTX.
Binance is currently experiencing the highest daily withdrawals since June, with more than $2 billion worth of Ethereum and Ethereum network-hosted tokens hosted drained from the platform in the last day, according to data firm Nansen. In tandem, the value of Bitcoin on the exchange has plummeted over the last day by more than 35,000 tokens, worth more than $610 million at current prices, according to data firm Coinglass.
“Withdrawals on the platform highlight the uncertainty and shattered confidence in the space, a desperation not to be caught up in another FTX event,” said Oanda’s Erlam. “That’s what fear does, especially in a situation where confidence has been so severely damaged, as it has in recent weeks.”
But Bitcoin and other tokens continue to exhibit short-term resilience. Why?
Much of it is likely due to the correlation between cryptos and stocks, which are risk sensitive assets that have become increasingly linked this year amid a tough macro environment of high inflation and rising interest rates. This correlation has been one of the few things helping Bitcoin make short-term rallies of late — though it has also been a double-edged sword, spurring selloffs. The
Dow Jones Industrial Average
indexes were both poised to head higher Tuesday as investor sentiment improved, no doubt boosting Bitcoin.
There may also be a shortage of sellers in the crypto market following tough market conditions that has seen traders big and small capitulate.
“I can’t think of a time when sentiment has been more bearish in the Bitcoin and crypto markets than right now. We’ve experienced an epic deleveraging,” said Al Morris, the founder of Web3 group Koii Network. “When you look at all this Bitcoin getting taken off exchanges and placed into self-hosted wallets, the picture being painted here is one of most of the would-be forced sellers having already sold.”
While this might be a signal of a crypto market bottom, investors would do well to be cautious: Crypto continues to face existential risks and Wall Street, at least, is highly bearish on any rebound in Bitcoin prices.
Across other tokens,
— the second-largest crypto — rose 2% to just shy of $1,300. Smaller cryptos or altcoins were more muted, with
each up 1%. Memecoins exhibited much of the same, with
both 1% higher.
Write to Jack Denton at email@example.com