What happened
It's another day of turmoil in the world of crypto. Most cryptocurrencies are trading lower Wednesday, with Cardano (ADA 5.34%), Chainlink (LINK 4.23%), and Cronos (CRO 3.59%) among the biggest large-cap decliners. As of 1:15 p.m. ET, those tokens had declined 3.7%, 5%, and 6.8%, respectively, over the prior 24 hours.
CRYPTO: ADA
Key Data Points
CRYPTO: LINK
Key Data Points
CRYPTO: CRO
Key Data Points
Most of Wednesday's price action with respect to these tokens appears to be related to the ongoing fallout from the collapse of FTX. Following an announcement from FTX CEO Sam Bankman-Fried that his centralized exchange is expected to enter bankruptcy proceedings, contagion-related fears have become the primary concern for crypto traders. On Tuesday, the news flow continued on this front, when crypto lender BlockFi become the latest to announce a possible bankruptcy filing.
For Cronos, the native token of the Crypto.com exchange, this decline is not unexpected. The token has remained under fire even after Crypto.com's CEO held an AMA ("ask me anything") session for the public on YouTube, as investors are looking to limit their exposure to exchange-related tokens.
Chainlink recently opened up staking capabilities on its network, but investors in this token -- like holders of Cardano and most others -- continue to focus more on potential systemic risks than any other sorts of catalysts.
So what
What's clear in the crypto world is that there are too many factors that are unclear at this point. For exchange-related tokens like Cronos, more turbulence is likely at least for the near term. Until the dust settles and investors can get some clarity about whether or not funds kept in crypto are safe, many will simply steer clear of assets that carry contagion risks.
For institutional investors, this is particularly true. Accordingly, as top 40 tokens, Cardano, Chainlink, and Cronos may drop further than most as the smart money moves out of crypto. It will be interesting to see what type of capital rotation takes place among retail investors.
Now what
The question many people have right now is how many more major collapses the crypto sector can handle. From the demise of Terra to the bankruptcies of Three Arrows Capital, Voyager, and now FTX and potentially BlockFi, the exchanges that were supposed to keep these digital assets secure are crumbling before our eyes. For many skeptics of the cryptocurrency sector, it appears the predictions that its Ponzi-like economics would eventually lead to an ugly reckoning are coming true.
For those who remain crypto bulls, it's likely going to be tough sledding from here. These sector-wide headwinds are being compounded by macroeconomic conditions that are making all risk assets less attractive. Until investors have more reasons to be optimistic about both the economy and monetary policy, and until their faith in crypto stability is bolstered, it's hard to predict when the sector will see a light at the end of the tunnel.
