Indian cryptocurrency investors are bracing for a period of volatility after prices plunged globally as a fallout of panic selling led by insolvency reports of the crypto exchange FTX. While Bitcoin dropped below the $20,000 mark, Ethereum stared at a major decline below the $1,500 levels.
“Globally, FTT token has a market cap of $2 billion. So $2 billion worth of crypto is going down. People are losing trust in the second biggest crypto exchange in the world. We are already in a bear market, so it’s not good timing and now people will be apprehensive towards many exchanges and might question their credibility,” said Kashif Raza, founder of Bitinning.
The Bahamas-based exchange’s native token FTT fell on reports that sister company Alameda Research’s balance sheet had stocked FTT tokens, which comprised around $6 billion of its $14 billion assets.
Selling pressure intensified after the CEO of the world’s largest crypto exchange Binance, Changpeng Zhao, said the company will be liquidating all the FTT tokens held by it. The largest cryptos — Bitcoin and Ethereum — plunged following the reports, weighing on the overall market.
“FTT is down in the USDT market by 23 per cent. The token’s current price sits at around $17.212, a dramatic 79 per cent drop from its all-time high of $85 around a year ago,” said Rajagopal Menon, Vice-President at WazirX.
However, overall volumes at WazriX have remained flat, with no noticeable swings on the higher or lower side, he added.
India crypto impact
The impact in terms of volumes is expected to be less dramatic in the Indian market, because it has already shrunk significantly since the government introduced TDS (tax deducted at source) on sale of crytpo assets, according to industry experts. Even then, volatility in prices is a given.
“The overall crytpo market sentiment has been bearish for quite some time, so there aren’t enough volumes as far as Indian exchanges are concerned,” said Sharat Chandra, co-founder of India Blockchain Forum.
However, a full-blown recovery or rebound could take some time as there are several headwinds given the global economic scenario, wherein most asset classes are struggling, he added.
Menon said the volatility is expected to be led by FTT tokens and BNB (Binance coins), with sell-off likely to be seen across both exchanges. As investors ‘wait and watch’ to see how see the fight between the two exchanges pans out, any adverse event could affect the entire crypto market, he said.
Experts believe there could also be more such cases of stocking up of balance sheet asstes, because of which the sentiment in the crypto market has turned very negative. This has only been made worse by bearish views of the technical pundits who are predicting new lows.
“Indian exchanges will also feel the heat, especially the ones that have listed FTT tokens.There could be a lot more volatility in coming days. 1-2 more negative news flows and we could see panic being triggered in the market,” Raza said.
Chandra added that currently the crypto market is well-suited for institutional or long-term investors but not retail investors, “who have taken a back seat and might continue to stay low for 6-8 months”.