Why Ethereum, Shiba Inu and Dogecoin crashed today
Most cryptocurrencies and crypto stocks continued to plunge today as the industry grapples with the fallout from the events of the past few days that ultimately led to major crypto exchange FTX agreeing to sell its non-US operations to Binance.
Over the past 24 hours, shares of the world’s second largest cryptocurrency, Ethereum (ETH -13.82%), was trading down more than 24% at midday today. Sharing meme tokens shiba inus (SHIB -11.67%) and Dogecoin (DOGE -11.68%) traded over 16% and 23% lower, respectively.
In recent days, rumors have swirled about FTX’s creditworthiness after a scathing report by news site CoinDesk said the crypto exchange’s sister trading company, Alameda Research, held many of its total assets. in cryptocurrency. FTX Token (FTT -58.30%).
FTT is the internal cryptocurrency created by FTX. The concern was what would happen to both Alameda and therefore FTX, due to the connection between the two companies, if the price of FTT fell. Additionally, there were concerns about whether the FTT was being used as collateral in any way. Not that it matters that much now, but the price of FTT is down over 78% in the last 24 hours.
Hearing from Binance CEO Alameda Changpeng Zhao announced that he would liquidate $2 billion of his FTT holdings, prompting concerns about FTT’s price hold and the impact on FTX and Alameda.
As FTX CEO Sam Bankman-Fried tried to allay those fears, taking to Twitter to say that FTX’s balance sheet was healthy, customers began withdrawing their funds from FTX; the crypto exchange said it saw $6 billion in withdrawals in 72 hours. This ultimately led Bankman-Fried to turn to Zhao and sell FTX’s non-US operations to shore up the cash crunch the company was facing.
But the deal is pending due diligence, and there are already media reports, including one from CoinDesk citing unnamed sources, suggesting that Binance may not go through with the deal. This whole series of events has shaken confidence in the entire crypto industry, much like other major crypto meltdowns like algorithmic stablecoins.
“It shows that no one is too big to fail,” Pascal Gauthier, CEO of crypto wallet company Ledger, told CNBC. “FTX seemed untouchable.”
It could also hurt the resolve of the general public and reduce investment activity if people are skeptical of major crypto exchanges and think they lack stability.
I don’t know if the events of the past few days have affected my view of some cryptocurrencies, but more reflect the erratic nature of the industry as a whole and how it is still very close to the Wild West.
FTX has played a huge role in the industry, so seeing it go downhill so quickly – and realizing some of the issues it probably had – is going to raise a lot of questions.
In the end, my opinion has not changed on these three cryptocurrencies. I still like Ethereum at these levels and think the token has great long-term potential due to all of its real-world uses. Recent network upgrades should also greatly help Ethereum scale.
I’m still not a fan of Dogecoin or Shiba Inu due to their lack of real-world utility and lack of technical capabilities on each of their perspective networks.