2022 was a tough year for crypto, and November was especially hard on investors and traders alike.
While it was incredibly painful for many, FTX’s blowup and the ensuing contagion that threatens to pull other centralized crypto exchanges down with it could be positive over the long run.
Allow me to explain.
What people learned, albeit in the hardest way possible, is that exchanges were running fractional reserve-like banks to fund their own speculative, leveraged investments in exchange for providing users with a “guaranteed” yield.
Somewhere, across the crypto Twitterverse, the phrase “If you don’t know where the yield comes from, you are the yield!” is floating around.
This was true for decentralized finance (DeFi), and it’s proven true for centralized crypto exchanges and platforms, too.
Who would have known that a few ill-timed bank runs would pull down the entire house of cards by proving that while exchanges appear to have high revenue and tons of tokens on their books, many are completely unable to meet user withdrawal requests?
They took your coins and collateralized them to fund highly speculative bets.
They locked your coins in centralized DeFi platforms to earn yield, some of which they promised to share with you.
They placed user funds, along with their own reserves, into illiquid assets that were hard to convert into stablecoins, Bitcoin (
A steady flow of bad news could present a nice opportunity
Currently, Ether’s price looks a bit soft from a technical analysis standpoint, and the recent news about the FTX thief holding the 31st largest Ether spot position, plus concerns over censorship, centralization, the United States Office of Foreign Assets Control enforcement on this “whale” and other Ethereum-based protocols that have exposure or bankruptcy proximity to FTX and Alameda could stir up a bit of FUD that impacts the altcoin’s price action.
Top 10 addresses with the largest ETH holdings:
– 6 are CEX related wallets
– Jump Trading coming in third with just over 2M ETH
– @arbitrum bridge with ~750K ETH
– ETH Staking & WETH contract has over 19M ETH combined
Hoping to see less CEXes on the list in a year pic.twitter.com/S1HHi5swnN
— Martin Lee | Nansen (@themlpx) November 18, 2022
Uncertainty on when the Shanghai upgrade will be enacted and investor concerns about when staked coins can actually be withdrawn are also interesting conversations that could turn short-term sentiment against Ether.
The thesis is pretty simple. ETH has held support around $1,200–$1,300 pretty well through all of the previous months of bearish market developments, but will the potential challenges mentioned above lead to a test of the level again?
Stakers are essentially spot long and earning yield, so at this juncture, opening a low-level short position with take profits orders at $700–$600 could possibly be rewarding.
This newsletter was written by Big Smokey, the author of The Humble Pontificator Substack and resident newsletter author at Cointelegraph. Each Friday, Big Smokey will write market insights, trending how-tos, analyses and early-bird research on potential emerging trends within the crypto market.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.