Ethereum's Price Being Pushed Down by FTX, Here's How


Ethereum's Price Being Pushed Down by FTX, Here's How

Last Update: 2022-07-11

Ethereum's Price Being Pushed Down by FTX, Here's How:

FTX centralized exchange could be one of the biggest sources of selling pressure on Ethereum and other cryptocurrencies by funding traders who are willing to provide their coins in exchange for a high APY. Such a strategy creates massive pressure on an asset that is already struggling to maintain above local support levels.

Essentially, FTX is "paying" users for borrowing their Ethereum, which is later provided to short sellers on the FTX trading platform. Such loans are a direct way of devaluing any kind of assets, including Ethereum.

The interest rate is based on the demand for long and short assets on the platform. For example, when Terra (LUNA) entered the death spiral with UST stablecoin, FTX offered up to 18,000% APY to those who deposit some LUNA that can be used for shorting.

See related article: FTX Exchange Review

Obviously, such a scheme fuels the sell-off on the market as more selling volume is being injected into the market as short-sighted traders think that receiving an extremely high APY is better than providing more pressure on an already struggling asset.

As expected, the price of LUNA tumbled down to 0, which could be the fate of any asset that enters a similar death spiral that is being twisted even more with the help of platforms like FTX.

Previously, users noticed that FTX-related wallets had received millions worth of Ethereum in a short period of time, suggesting that additional selling pressure will appear on the market.

The lack of inflows and buying power on Ethereum and the crypto market in general are two main reasons that prevent ETH from entering a recovery rally on the market. At press time, the second biggest cryptocurrency is trading at $1,142.


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