Until the beginning of this week, Bitcoin
It was showing record low volatility, and that gave altcoins enough room to draw some pretty cool technical setups.
Meanwhile, on-chain data and technical analysis began to suggest that BTC was halfway through bottoming out, with many analysts believing that brighter days are ahead.
Fast forward to the present, and it turns out that the volatility spike that the market received was a black swan event.
As you already know, FTX is kaput.
Alameda Research is kaput.
BlockFi has suspended withdrawals, citing an inability to “business as usual,” so it is “pausing client withdrawals as permitted under our terms,” indicating that the company is also unable to operate.
The infection is spreading, and fragments of this Krakatoa-level event are bound to spread throughout the entire crypto-ecosystem.
At this time, it’s hard to form a short-term asset investment thesis just by looking at a chart, and the best thing unsure investors can do is either stick to a time-tested plan or do nothing.
The most likely outcome in the short term is that volatility will remain high, and cryptocurrency prices will continue to decline for a while.
No one feels comfortable focusing on the potential negative outcomes awaiting the cryptocurrency sector and cryptocurrency prices, but it is the responsibility of every investor to consider the absolute worst outcomes and put together a contingency plan.
That way you don’t freak out when the fudge really hits the fan.
Here are some things to watch over the coming days.
USDT/USD vs. USDC/USD
During high volatility events, stablecoins sometimes break their currency’s peg to the dollar. If there is some wild nonsense about Bitcoin being banned, hacked, or dying, stablecoin prices occasionally surge above $1.00 as traders seek shelter in the dollar-fixed asset.
During the events of the cryptic Black Swan, sometimes Tether
lose its peg to the dollar. This has happened many times in the past, and usually, once the smoke clears, the 1:1 wedge recovers.
On November 9, the USDT/USD pair broke below its currency peg to the dollar, dropping to $0.97 at one point, according to data from TradingView and Coinbase. While USDT fell below the peg of the US dollar currencies
The value rose to $1.01.
USDT/USD peg. Source: TradingView
While we won’t be exploring the unconfirmed reasons why there was a rift between them, the unsubstantiated rumors regarding Tether and Alameda’s research can easily be found on Twitter.
It is important to note here that panic can easily be triggered by misinformation, rumors, and lies, so it does not matter if the rumors about Alameda/Tether are completely false.
If it goes viral on social media and scares off investors, they will act and in this case; Many will or are in the process of flipping USDT to USDC, BTC or other stablecoins.
Similar behavior was seen during the collapse of Terra and C. On May 12, USDC price increased from $1.00 to $1.06 to $1.19, according to data from TradingView and KuCoin. On the same day, USDT dropped briefly to $0.98 and $0.94.