Bitcoin prices rose on Wednesday, recovering from a two-year low hit the day before. Even so, traders remain cautious about the possibility of contagion from the collapse of cryptocurrency exchange FTX.
The world’s largest digital currency, Bitcoin, rose nearly 3% to trade at $16,501.30 at around 8:31 a.m. ET. This increase in value comes as more and more investors are turning to Bitcoin as a safe haven asset amid global economic uncertainty.
"It's not surprising that we're seeing a rebound off of a support level, since the market has been quite oversold in recent weeks," said Vijay Ayyar, vice president of corporate development and international at crypto exchange Luno.
However, this move doesn't necessarily mean that the market is bullish yet. We could be seeing a bearish bounce here, with resistance around $17,000, before further downside targeting $14,000, he added.
After the fall of FTX, a once $32 billion empire which was one of the world’s largest cryptocurrency exchanges, markets remain on edge.
Investors are worried that the fallout from FTX could lead to contagion and are looking for signs of other companies or entities that may have had exposure to the exchange. FTX was founded by Sam Bankman-Fried.
According to Ayyar, markets have been on edge since FTX collapsed, fearing that the fallout will spread to other companies that are connected to FTX.
FTX could have more than 1 million creditors. The company owes $3.1 billion to its 50 largest unsecured creditors alone. However, FTX’s various entities across the world only had around $1.24 billion in cash balances as of Nov. 20, according to a court filing published this week. This means that FTX may not have enough money to pay all of its creditors.
Bankman-Fried, who resigned as FTX CEO earlier this month, has been trying to broker a deal from his home in the Bahamas to bail out the exchange. However, it appears highly unlikely that such a deal will be reached.
Justin Sun, a high-profile crypto entrepreneur, said Tuesday that he and his associates were considering whether to buy some of the assets from FTX.
Cryptocurrency ether also rose on Wednesday, trading at $1,165.95 at 8:32 a.m. ET.
Ether was under pressure after hackers stole around $477 million in cryptocurrency from FTX. This was a major blow to the currency, and many investors are now reconsidering their positions.
The hackers then converted a huge amount of money - around $280 million - into ether before dumping the holdings into another cryptocurrency. This selling put pressure on ether prices.
This year has been tough for the cryptocurrency industry, with a number of collapses, liquidity issues and bankruptcies. More than $1.3 trillion of value has been wiped off the entire cryptocurrency market this year.
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