Bitcoin, Ethereum prices continue to fall amid FTX drop. What’s next for the cryptocurrency market?

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Crypto was starting to catch a break – until it wasn’t.

One of the largest and fastest-growing cryptocurrency exchanges crashed last week, which also brought down cryptocurrency prices that have been recovering since the crash. Bitcoin had previously been trending higher after nearly a month of fresh lows, but the FTX collapse sign quickly dropped below $17,000, a price not seen in two years. The price of Ethereum has been in a similar downtrend since Friday morning, dropping to the low $1,200s.

The consequences of FTX’s bankruptcy do not end there. Its explosion affects the entire cryptocurrency world. According to the Wall Street Journal, one example is BlockFi, a major cryptocurrency lender that is preparing for its own potential bankruptcy. And Genesis Global Trading, the lending arm of the Gemini cryptocurrency, stopped issuing and buying back new loans after FTX’s bankruptcy.

“When one person goes down, that balance opens up holes in all the other people who might be owed money or have escrow money in FTX,” said Ben McMillan, CIO of IDX Digital Assets, a cryptocurrency asset management firm. digital asset field. “When leverage is removed, there’s a huge void, and a player like that can take out a lot of other people in that ecosystem.”

Cryptocurrency investors on the FTX platform are seeing their accounts frozen, unable to get their money back, which may soon come to BlockFi users as well. Investors outside of these ecosystems are also not safe seeing crypto assets fall in value. Here’s what investors need to know and what to do as the FTX contagion continues.

Where is cryptocurrency going after the collapse of FTX?

The future is uncertain.

Just as no one can predict the sudden burst of FTX, no one can predict where prices are headed. The market was already in crypto winter, and FTX’s bankruptcy could only serve to prolong and worsen the freeze, but maybe not as much as you think.

“Immediate contagion is not something I expect the industry to be in for more than a month or two,” McMillan said. “But, especially given the macro backdrop, I think it could dampen some of the risk appetite in the space.”

McMillan believes that the failure of FTX will ultimately prevent major players from entering the cryptocurrency space until at least 2023. For smaller investors, these new lows may present potential entry opportunities, although they add significant risk to this entry point.

Immediately after FTX, the value of both bitcoin and ethereum quickly fell by more than 20% last week, with bitcoin in particular hitting price lows not seen in two years. The question is, will this be the bottom before the next bull run? But again, there’s no way to tell for sure.

“Cryptocurrencies are weakening as risk appetite has just left the building,” Edward Moya, chief market analyst at Oanda, wrote in Market Pulse.

​”We ​​will be talking a lot about FTX in the coming months, but what will drive cryptocurrencies is any liquidity crisis at Binance, Coinbase, Lbank or Consbit. A lot of bad news has priced in, so another collapse of a major crypto company or bitcoin There may be a risk-off movement on Wall Street to push it below the recent low.”

More institutional failures mean worse price action for investors, especially as risk appetite wanes in these economically challenging times.

What should crypto investors do?

It’s a good time to do some research.

The collapse of FTX highlights the risks of investing in the cryptocurrency market. Even an apparently well-functioning exchange can go down and you may suddenly find yourself with all your accounts frozen and unable to withdraw your funds. Therefore, it is a good idea to carefully read and understand the terms of service and user agreements of the exchange and wallet (if applicable).

Speaking of crypto wallets, if you don’t have one, now might be a good time to get one. Cold wallets are the most secure because they store your cryptocurrency offline on a hardware device similar to a USB drive. In contrast, hot wallets are available online, and the downside is that your private keys are usually known to the website owner, making your keys more vulnerable.

Unfortunately, if something goes wrong with your exchange, insurance won’t be your hero. Most exchanges’ insurance policies do not cover you if the exchange declares bankruptcy. Most policies only cover certain criminal events, including fraud and theft.

Experts recommend devoting only 3-5% of your investment portfolio to cryptocurrency, and this is due to a high risk tolerance. Plus, you should only invest in what you’re willing to lose, as these past two weeks have shown us that price volatility isn’t the only thing that adds risk to your crypto portfolio.

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