Why did crypto crash today?
Crypto Crash Today
It's no longer a market worth $1 trillion. In a shocking turn of events, the total value of the crypto market dropped to $870 billion in just a few days. At the heart of the sell-off were problems with FTX's liquidity. The latest drop in the sector was caused by the "too big to fail" exchange in The Bahamas.
In the last few days, worries about FTX's apparent lack of money have been growing. The price of FTX's native token, called FTX, keeps going down. In the past five days, the FTT token has lost more than 80% of its value.
After a wave of withdrawals threatened to shut down FTX, things happened quickly and mostly on Twitter. FTX tried to sell a big part of its business to a competitor called Binance. But just as quickly as Binance offered an acquisition as a way to save the company, it took it back.
Binance CEO Changpeng "CZ" Zhao said in a tweet on Nov. 9 that the company would not pursue a possible acquisition of FTX.com because of "corporate due diligence" and "the latest news reports about mishandled customer funds and alleged U.S. agency investigations." He said this only a day after offering a bailout package.
Binance leaving means that FTX will continue to go down.
Sam Bankman-Fried built a huge crypto empire, but it is falling apart quickly. The CEO of the FTX is no longer in the club of billionaires. In the crypto world, he is known as SBF. Overnight, he disappeared from the Bloomberg Billionaires Index, and his net worth dropped by 94% to just over $991.5 million.
Also, the crypto virus has spread. Both Bitcoin (BTC) and Ethereum (ETH) markets have seen sharp drops. In the last five days, BTC has lost more than 17% of its value, while ETH has lost almost 18%.
Even some of the most important altcoins went down. Solana (SOL), which has a lot of support from Bankman-Fried, has lost 12% in the last 24 hours.
Since the beginning of the year, BTC has lost about 63% of its value. The price of the original crypto has dropped below $18,000. The price of Ethereum has dropped 64% since the beginning of the year and is now below $1,300. That's a long way from Ethereum's (ETH) all-time high, which will be close to $4,900 in November 2021.
What You Need To Know About Crypto Investing
People who bought Bitcoin, Ethereum, and other cryptocurrencies early on have made a lot of money.
"In the past year, we've seen that a down market can quickly turn into a bull market," says John Wu, president of Ava Labs.
But the cryptocurrency market has a long history of being very unstable, which is not what investors want when the market is uncertain.
Bitcoin has had several big drops of more than 80% in its history, the most recent of which was in 2018.
The original crypto isn't tied to any physical assets or intellectual property, and it doesn't make money for investors or pay them dividends or interest. Experts say that BTC prices are only affected by supply and demand, which makes it hard to figure out what their real value is.
Warren Buffett, the CEO of Berkshire Hathaway and a legendary investor, once talked about Bitcoin's flaws at Berkshire's annual investor meeting. He told investors that he wouldn't pay $25 for "all of the Bitcoin in the world."
"I don't know if it will go up or down in the next year, five years, or ten years. But I know for sure that it doesn't get bigger. He said, "It doesn't do anything."
Bitcoin and other cryptocurrencies may stop being so volatile at some point in the future. Still, the recent price action on the cryptocurrency market suggests that investors may have a rough ride for a while longer.
Should You Buy the Dip in Crypto?
When buying the dip, investors in crypto should be very careful.
When prices drop as quickly as they have recently in the crypto market, that coin you've been eyeing can look like a great deal. "Never try to catch a falling knife," says an old Wall Street proverb that fits situations like this well.
Using your imagination, you should be able to see that "buying the dip," or catching a falling knife, almost always ends in pain. That doesn't mean that smart investors can't make a quick profit when the market is very volatile. But the point is that big, quick changes in the market can be scary for the average investor.
