According to one analyst, cryptocurrency derivatives exchange FTX may be one of the reasons behind the selling pressure on altcoin projects. Here are the details…
Is FTX behind the altcoin selling pressure?
According to one analyst, the FTX centralized exchange could be one of the biggest sources of selling pressure on Ethereum and other cryptocurrencies by funding traders willing to provide coins in exchange for a high APY. Such a strategy puts a lot of pressure on an asset that is currently trying to stay above local support levels. According to analyst Arman Shirinyan, FTX stands out especially with short positions (short selling) in Ethereum price.
Essentially, FTX “pays” users to borrow their Ethereum, which is then provided to short sellers on the FTX trading platform. Such loans are a direct way to devalue any asset, including Ethereum. The interest rate is based on the demand for long and short assets on the platform. For example, when Terra (LUNA) entered the death spiral with its UST stablecoin, FTX offered up to 18,000 percent annualized rate of return (APY) to those who deposited some LUNA that could be used for short positions. The analyst used the following statements on this subject:
Clearly, shortsighted traders think that buying an excessively high APY is better than putting more pressure on an already struggling asset. Therefore, such a scheme fuels sales in the market as more sales volume is injected into the market.
LUNA had dropped to zero
After the above market movements, as expected, the price of LUNA dropped to 0. This could be the fate of any entity that falls into a similar death spiral that is twisted even more with the help of platforms like FTX. Earlier, users noticed that FTX-related wallets received millions worth of Ethereum in a short period of time. This indicated that additional selling pressure would emerge in the market.
According to the analyst, the lack of entry and purchasing power in Ethereum and the crypto market in general are the two main reasons that prevent ETH from entering a recovery rally in the market. Currently, Ethereum is changing hands at $1,147, down 3.5 percent. ETH, the second largest cryptocurrency by market capitalization, has gained 6.8 percent in the last seven days. Ethereum is well below its all-time high recorded on November 10 last year. At the time it was changing hands at $4,878. Currently, it’s about 76 percent below that level.
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