Crypto.com’s native Cronos token (CRO) showed restraint on November 14 against mounting selling pressure following the FTX’s Dramatic Collapse Last Week. Now, the CRO/USD pair is eyeing a decisive price rally.
On November 14, the price of CRO oscillated between profit and loss, trading around $0.069 a day after crashing to $0.05, its lowest level since April 2020 – a drop of 60% from from the November high of around $0.178.
CRO funding rate drops to -3%
The period of CRO price declines occurred alongside a sharp decline in the token’s perpetual term funding rates.
Funding rate are recurring payments made by traders based on the difference between futures and spot market prices. A positive funding rate means bullish traders (long positions) are paying bearish traders (short positions), which represents their confidence in a price rise.
Conversely, a negative funding rate means that short traders are paying long traders to keep their positions open. On November 14, CRO funding rates on Huobi and OKX fell to minus 3%, showing that traders are extremely bearish on the token.
“It’s literally the exact same dynamic that happened before Celsius and FTX crashed,” warned Dylan LeClair, lead analyst at digital asset fund UTXO Management on November 13, when CRO funding rates were near minus 2%.
FTX Contagion Fears Spread to Crypto.com
The sale of CRO started from contagion fears amid the FTX fiasco, there are particular fears that Crypto.com, a Singapore-based crypto exchange, could collapse in the same way as FTX.
At the heart of these concerns is potential insolvency, with analysts pointing out that Crypto.com holds illiquid cryptocurrencies like Shiba Inu (SHIB) and its own token CRO as reserves, which would represent 40% of the exchange’s total assets.
4.https://t.co/INIxikfNzy holds $1.6 billion in BTC/ETH/USDT/USDC/DAI/BUSD assets, accounting for 60%.
40% of assets are low liquidity assets.
— Lookonchain (@lookonchain) November 13, 2022
Additionally, Crypto.com has also moved $210 million worth of stablecoins of Binance and Circle before showing its reserves to the public. Binance CEO Changpeng Zhao confirmed the move, urging caution, the day before CRO fell to its April 2020 low.
If an exchange has to move large amounts of crypto before or after demonstrating its wallet addresses, that’s a clear sign of trouble. Stay away. Stay #SAFU.
— CZ Binance (@cz_binance) November 13, 2022
Additionally, Crypto.com also mishandled a $400 million Ether (ETH) operation, send it to a Gate.io exchange wallet instead of his cold room. Later, the exchange managed to recover the funds, but this also raised a lot of questions.
Crypto_com CEO claims they “accidentally” sent $400 million of their eth to the wrong wallet.
He lies or is incompetent. https://t.co/hWXvPqBime
— Coffeezilla (@coffeebreak_YT) November 13, 2022
Overall, Crypto.com saw its users withdraw $14 million in ETH and $39 million in other tokens over the weekend, according data tracked by Argus Inc.
50% Cronos price relief in sight?
From a strictly technical standpoint, however, CRO price could still see a potential relief bounce in the coming weeks.
A host of indicators are supporting said bullish outlook, including the weekly CRO Relative Strength Index (RSI), which fell to near 30, almost “oversold” territory. A similar decline in June earlier this year preceded a 75% recovery from $0.099 to $0.162 as seen below.
The other bullish indicator features strong historical support at $0.061. Additionally, the current CRO price range of $0.061 and $0.111 has the highest volume profile visible range (VPVR) of the token on record.
In other words, the price of CRO could rally to $0.111, up more than 50% from current price levels, as the next upside target.
Conversely, the fall in CRO/USD alongside funding rates suggests that its decline may have been driven by futures markets, which were also case with the collapse of Terra in May. Thus, the lingering bearish sentiment across the broader cryptocurrency market could dampen CRO’s recovery prospects.
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