The FTX crisis has caused a lot of pressure on the cryptocurrency market - sell-offs in the broader market. Crypto influencers warn that the collapse of FTX could cause institutional investors to lose confidence and trust in the digital asset market.
Technically, the picture on the BTCUSD chart has not changed much in recent days. Sideways at $15,977-17,592 has not yet lost its relevance. At the same time, a bearish pennant appears to be on the daily chart. Against this background, there is a possibility of an even stronger fall. In this case, even the strength of the $13,000 level may be in question.
Meanwhile, on-chain data shows that institutional investors are indeed selling their holdings in BTC after the collapse of the Sam Bankman-Fried crypto exchange.
Are institutional investors losing trust in cryptocurrency?
Cryptocurrency exchange FTX recorded a massive outflow of crypto assets and a sale of FTX tokens (FTT), after news of liquidity problems reached investors. FTX's plans to seek help from investors and peers fell through, forcing CEO Sam Bankman-Fried to file for bankruptcy and step down as CEO.
Institutional investors also sold their hodl tokens. According to the fund's volume index, transaction volume increased significantly during the FTX liquidity issuance. The Trade Volume Index indicates that institutional investors have sold their holdings in BTC.
What's more, the Coinbase Premium Index indicates that US instrumental investment fell 0.13% after the FTX events, confirming the likelihood of a sell-off of the big players' positions. This can be confirmed by the Trade Holdings Index, which shows a decrease in the total number of coins held by holders of digital assets.
Who is selling bitcoin?
In addition to destroying billions of dollars of global market capitalization, the FTX crash also shattered the confidence of even the most staunch bitcoin holders. The market saw aggressive selling pressure last week, causing the price of BTC to drop to $15,500.
Data on changes in BTC holdings among short-term holders (STH) and long-term holders (LTH) provide insight into where the selling pressure is coming from.
Historically, short-term holders are the first to sell their coins when the market turns red. However, the ongoing volatility has not affected STH as much as previous market turmoil.
Glassnode data shows that the drop in FTX was only the fifth largest number of STH sellers since March 2021. About 400,000 BTC held by STH were traded between November 10 and 17.
The ongoing market crisis has not shaken the confidence of long-term holders
The data showed that those who held their coins for more than six months sold less than 100,000 BTC last week. This is significantly less than the selling pressure caused by Russia's invasion of Ukraine in February and the collapse of Luna in June.
The fact that most long-term holders remain indifferent to market volatility is not surprising. The owners of this group are statistically the least inclined to sell their BTC and have long created the strongest resistance to its price.
Surprisingly, however, the addresses that held bitcoin for more than a decade turned out to be the ones that were most affected by the crisis. While the 3,600 BTC they have traded in the past week pales in comparison to the volume spent generated by STH, it is still the highest amount of coins ever traded by these ultra long holders.
Why bitcoin and the FTX crash are 'two big differences'
Jack Mullers, CEO of cryptocurrency company Strike, stated that bitcoin is different from other cryptocurrencies amid recent events that have shaken the market.
When asked about the recent crash of FTX and whether his company was exposed to the crypto exchange, Mullers said:
"No. Strike, me and bitcoin in general have nothing to do with Sam Bankman-Fried and FTX. This is nothing but a completely heinous and malicious crime, just like someone's car on the street near my house. It also has nothing to do with bitcoins. However, it is important to note that the world is finally beginning to understand that there is bitcoin, and there is everything else."
Muller noted that many people have taken advantage of bitcoin's innovations to develop other coins such as Orange Coin, Pink Coin, and FTX. According to Muller, most of these coins are used to commit crimes and have nothing to do with the main cryptocurrency.
According to Muller, it is necessary to stop using blockchain technology to create other cryptocurrencies and use them for fraud. He emphasized that the collapse of FTX is an expensive lesson.
"It doesn't surprise me that FTX doesn't own bitcoin. Because if you want to commit crime and fraud, you don't use bitcoin."
Muller added that while the FTX crash affected the wider crypto market, it's good that it happened. The bad players in the crypto space need to be washed out and it would be best if FTX is eliminated from the crypto market.
