Over the weekend, the cryptocurrency market moved sideways before taking a dip on Monday. The new week has started on a red note, with Bitcoin trading at $25,665 at the time of writing. Ether has fallen under $1,600 and is now exchanging hands at $1,590.
Among the top 100 crypto assets, every coin is currently in the red except for a couple of stablecoins. Meanwhile, the total crypto market cap is down by 1.4% at $1.06 trillion.
This comes as Bitcoin miners in Texas shut down most of their machines while the Lone Star state, which is one of the top destinations for Bitcoin miners thanks to its traditionally low-cost energy and friendly regulations, grapples with its power crisis. This is a significant development, as leading mining companies such as Marathon Digital Holdings and Riot Platforms have major facilities across Texas.
Last week, the Biden administration declared a power emergency in Texas amid a brutal heat wave.
“We have consistently been seeing 90% plus curtailment of Bitcoin mining each day this week that power conditions tightened,” said Lee Bratcher, president of the Texas Blockchain Council. “The power that is not off is most power to the office buildings and backup systems that are on-site and not the machines themselves.”
According to Bratcher, all the large Bitcoin miners shut down their machines during the power emergency. This also happened last summer when another heat wave induced high power demand for the state. The disruption can worsen the already dire situation for the miners who are already battered by low Bitcoin prices, inflated electricity prices, and the nearing halving that will drastically reduce mining revenue in 2024.
Despite all this, Bitcoin briefly did breach $26,000 on Friday before encountering resistance amid bearish sentiments, signifying a battle between the bulls and bears in the market.
Amidst this lack of momentum, the crypto fear and greed index continues to be in the fear zone with a score of 40/100 for the second consecutive day, the same as last week.
This fear is due to a big event coming up this week in the form of bankrupt crypto exchange FTX's liquidation of its $3.4 billion worth of crypto holdings. This is expected to create selling pressure, further dampening price action.
Impending Sell-off: FTX Dump
The cryptocurrency market is abuzz with speculation as this week promises some serious volatility, with the beleaguered crypto exchange FTX expected to gain court approval to liquidate an estimated $3.4 billion in cryptocurrencies. The market is now concerned about the effects of this event on prices, which are already showing great weakness amidst the lack of momentum and liquidity.
This looming FTX liquidation can dampen Ethereum and Solana's positive strides made in the past week, with a potential spot ETH ETF and credit card giant Visa expanding its stablecoin capabilities by adding support for Solana.
This makes sense, given that Solana accounts for the largest portion of FTX's assets, which triggered a flurry among SOL traders and investors. The price of Solana has plunged to under $18 to now trade at $17.71 and is down over 93% from its all-time high (ATH) of almost $260. The FTX estate holds $1.5 billion in crypto assets on the Solana network, out of which SOL tokens account for just $128 million, as per Solscan data.
The rest of the amount is distributed between several Solana-based altcoins such as Wrapped Bitcoin (WBTC), Serum (SRM), Maps token (MAPS), and other tokens.
With $128 million worth of SOL and hundreds of millions worth of other SOL-affiliated tokens ready to be unleashed onto the market, investors are feeling wary and expecting the prices to plunge. Aptos, Dogecoin, Polygon's MATIC, and XRP also make significant chunks of FTX's portfolio.
Besides ETH, Solana (SOL), and its affiliated crypto assets, FTX's native token, FTT, is also in danger of sell-off. FTT is currently trading at $0.984, nearly 99% off its $84.18 peak hit two years ago. The exchange's native token makes up about half a billion dollars of the assets to be liquidated. FTT's limited liquidity and market depth raise questions about FTX's liquidation strategy for these tokens. In the past 24 hours, FTT recorded only $13.5 mln in trading volume, as per CoinGecko.
While many crypto market participants are voicing their concerns over the impending sell-off on X (formerly known as Twitter), others are urging to be calm, as the bankruptcy plan restricts how much can be sold off at once.
According to FTX bankruptcy filings, the proposed plan for the liquidation of the now-defunct crypto exchange's assets imposes a series of conditions on the sale of tokens.
A few weeks ago, FTX proposed to appoint Galaxy Digital Capital Management as the investment manager to oversee the sales of its recovered crypto holdings. As part of this plan, the FTX estate would only be able to sell as much as $100 million worth of its tokens each week. This limit, however, could be stretched to $200 mln on an individual token basis.
These limits are set in order to minimize the impact of FTX's sales on the broader crypto market while still allowing the company to make creditors whole.
The most important thing to note here is that the plan is not finalized as it is yet to be signed off on by the courts. The plan, along with other matters related to the FTX token sales, are expected to be presented before the Delaware Bankruptcy Court this week on Sept. 13.
FTX has also been ramping up its recovery measures. Recently, it filed a clawback lawsuit against omnichain interoperability platform LayerZero and is hoping to recover $21 million. The platform is also demanding $13 million from LayerZero's COO Ari Litan and is pursuing another $6.5 million from Skip & Goose, a firm owned by Litan.
On top of that, FTX is revisiting promotional fees dished out to sports celebrities. In an over-180-page Aug. 31 court filing, FTX's financial advisers laid out a detailed list of businesses and high-profile figures it paid in its marketing efforts to see if the rules allow bankrupt companies to reverse the payments.
The list includes over $200K made to American football quarterback Trevor Lawrence, over $270K to former baseball star David Ortiz, over $300K to Tennis pro Naomi Osaka, and $750K to former basketball pro Shaquille O'Neal as well as nearly $420K made to pro basketball team the Golden State Warriors, and over $250K in various payments to Miami Heat.
Macroeconomic: CPI & Other Data Due for Release
Another factor that can put downward pressure on crypto prices this week is the upcoming Consumer Price Index (CPI) developments. The US CPI for August is also due out on Wednesday.
The core inflation is expected to weaken, but the headline rate is estimated to rise. After the latest CPI and personal spending numbers, a pickup in inflation would fuel bets on more Fed rate hikes. The central bank of the US takes the Core PCE Price Index into account to measure inflation.
Gold experienced its first weekly decline in three weeks. However, spot gold traded slightly higher on Monday at $1,925 per ounce. When it comes to investment demand, physically-backed gold ETFs experienced net outflows for the third consecutive month, losing $2.5 billion in August. Meanwhile, central banks collectively reported healthy net purchases of 55 tonnes in July, with China adding around 23 tonnes, according to the World Gold Council.
In contrast, the US 10-year treasury note yield has climbed towards 4.3%, supported by a surprising drop in US weekly jobless claims to their lowest level since February. Meanwhile, The US dollar index has slightly dropped to 104.67 after reaching a six-month high on Friday.
The US retail sales and initial jobless claims will also need consideration with tight labor market conditions supporting wage growth. An improvement in wage growth counters the effects of Federal Reserve rate hikes, fueling consumption and demand-driven inflation.
The Fed has expressed concerns that robust economic activity could lead to continued inflationary pressures, which means further tightening of monetary policy. Not to mention, the extension of the OPEC+ output cut has led to a rise in oil prices, contributing to inflationary risks.
Investors are currently pricing in a 93% probability that the Fed will keep rates stable at 5.25%-5.50% after its next meeting ends on Sept. 20, according to CME group's FedWatch Tool. The upcoming Fed meeting will be a pivotal event to watch after Central Bank Chair Jerome Powell's recent address at the Jackson Hole symposium, where he noted that the Fed is ready to raise the interest rate further if needed.
Besides US inflation figures, this week will also bring focus on retail sales data, the ECB monetary policy meeting, and a range of Chinese economic data releases. Concerns about China's weakening growth prospects have already been contributing to the cautious sentiment among investors.
This Week's Token Unlocks
Much like every week, several cryptocurrency projects will release a certain number of their tokens in the market, which, if significant enough, can affect their prices based on the demand and supply dynamics.
One of these projects includes Aptos, which will be unlocking 4.54 million APT tokens worth $22.8 mln on Sep. 12. Out of these, 1.33 million APT belong to the Foundation while the rest is of the community. The majority of APT supply is actually locked, with only 230 million of over 1 billion total supply currently circulating in the market. Trading at $4.99, the token recorded about $58 mln in daily volume and is currently down 30% in the past 30 days and 75% from its ATH hit in January.
According to TokenUnlocks, a popular liquid staking solution, Lido will also be unlocking 1.50 million LDO tokens worth $2.19 mln on Sept. 13, which belong to investors. The $1.28 bln market cap LDO has the majority of its token supply already unlocked. As of writing, LDO has been trading at $1.45 while managing just over $27 mln in trading volume. The token has lost 22% of its value in the past 30 days and more than 80% since its ATH.
Among the microcaps, Sweatcoin will unlock 227.15 million SWET tokens worth $1.68 mln while another 2.55 mln will be released as part of walking emission on Sept. 13. Meanwhile, the token, which is trading at $0.00736, recorded only $1 mln in 24-hour trading volume, as per CoinGecko. SWEAT's price is up 6.7% in the past month but down 92% from its peak a year ago.
On Sept. 14, the non-custodial DeFi protocol Euler's $50 million market cap EUL token, which is seeing less than $150k in trading volume, will see 155.39k tokens worth $408.66k brought into the market.
Over the weekend, FLOW will release 4.69 million tokens worth $1.90 mln, as part of a development team vested over 36 months with a one-year cliff, along with Dapper Labs' 2.60 mln worth $1.05 mln. FLOW is a $416 mln market cap token recording $17 mln in 24-hour trading volume. The token's price is down 80.6% over the past year and 99% from its peak.
Meanwhile, ApeCoin, which has less than half of its supply circulating in the market, will be unlocking 40.60 mln APE tokens worth $47.9 mln on Sunday. These tokens are broken down into Yuga Labs, Yuga Labs founder, launch Contributors 1, launch contributors 2, launch contributors 3, charity, and treasury. The token has seen a decline of 78% in value over the past year and is down 95.6% from its ATH while managing $47.2 mln in trading volume.
So, as can be seen, this week can be expected to be a volatile one, with the market already starting to make some noise on Monday with prices dipping. Now, with a row of events ready to take place in the coming days, the markets are expected to remain choppy due to both the uncertain crypto and macroeconomic factors.