Over the past week, the global crypto market capitalization has risen by two percent, suggesting a potential uptrend. Bitcoin, Ethereum, and other altcoins, which suffered significant losses after the FTX crash, began to correct their price action soon after.
On November 11, the cryptocurrency market watched in horror as Sam Bankman-Fried, CEO of FTX, the world's second-largest cryptocurrency exchange, filed for bankruptcy. The collapse of the exchange is one of the most shocking incidents the cryptocurrency industry has ever witnessed.
Several companies associated with FTX were affected. This is because the funds linked to the exchange were frozen and left at the mercy of FTX bankruptcy proceedings. The crash also sent cryptocurrency prices into a tailspin, leaving investors with massive FUD on the future of cryptocurrencies.
However, a little over a fortnight later, it looks like the crypto market can address the effects of the FTX crash and remain stable going forward. Let's look at some of the positive developments taking place in the crypto space, which instill hope for a market recovery.
Several cryptocurrencies are showing potential recovery
After the FTX crash, most cryptocurrencies started projecting obvious downtrends. Everyone expected the market to decline further, but surprisingly, the market picked up enough momentum to show signs of recovery of late.
Over the past week, the global crypto market capitalization has risen by two percent, suggesting a potential uptrend. Bitcoin, Ethereum, and other altcoins, which suffered significant losses after the FTX crash, began to correct their price action soon after.
At the time of writing, BTC was trading at $16,936. That's an increase of 3.19 percent over the past seven days. It's a similar story with the second largest cryptocurrency by market cap, Ethereum (ETH).
ETH suffered significant losses when FTX crashed. The altcoin price plunged from $1,640 to $1,109. However, due to the support of the whales and the increase in validation nodes on the Ethereum network, the price valuation of ETH has seen an increase of 8.16 percent over the past week, currently trading at $1,274.92.
Crypto Market Largely Unaffected by China Unrest and BlockFi Bankruptcy
On Nov. 11, the day FTX filed for bankruptcy, Bitcoin plummeted from the $21,300 range to as low as $15,840. Fortunately, BTC was able to post a slight recovery and establish a support level of $16,000, which it has stayed above ever since.
After the FTX crash, the crypto markets were hit by two other major events that threatened to push prices down yet again. For starters, major cryptocurrency lender BlockFi filed for bankruptcy on Nov. 28, citing exposure to FTX. On the same day, uncertainties surrounding China's anti-lockdown protests weighed on the broader stock market, with analysts fearing a knock-on effect on cryptocurrencies.
While the cryptocurrency market faced some headwinds due to these events, prices rallied the next day. For example, Bitcoin fell slightly from the $16,500 range to its $16,000 support level on Nov. 28 before rallying back to $16,501 on Nov. 29. Ethereum also experienced a slight drop, falling from $1,216 to $1,162 on Nov. 28. altcoin quickly recouped its losses, jumping to $1,201 on Nov. 29.
The Fed lowering interest rates could be an advantage
Raising interest rates to combat inflation is common practice. The US Federal Reserve has been on a continuous wave of raising interest levels to avoid an ugly recession. However, rising interest rates are painful for investors and detrimental to the conduct of business.
The US Federal Reserve raised interest rates again by 0.75 basis points in early November. This was the fourth increase of the same amount this year, as efforts to cool the economy and rein in inflation continue. And the ramifications of each new Federal Reserve rate hike continue to reverberate across crypto markets and stock markets, with investors at a loss as to how to react to the tumultuous economic environment.
However, a glimmer of hope emerged when Jerome Powell, Chairman of the US Federal Reserve, recently hinted that the Fed is willing to slow the pace of interest rate hikes. While Powell mentioned that a complete pause on interest rate hikes was out of the question, cutting interest rate hikes after four consecutive big hikes would be an excellent boost for the global crypto market. It would be an encouraging development and could help crypto markets recover from the FTX crash.
conclusion
If we look at historical data, cryptocurrency valuations typically follow a boom-bust cycle. There have been many other black swan events in the past that have caused crypto markets to crash. However, the digital asset industry usually bounces back to reach new heights every time. Therefore, the recent crash of FTX could be just another failure in the crypto cycle, and a big boom could follow in the near future.
