Crypto Week: Floptober Rattles the NFT Market

October is traditionally negative for the crypto industry. Bitcoin (BCT) is struggling to hold itself in the neutral zone around $27,000 per coin. Altcoins are in red with Ethereum down by 7% since the beginning of October. But the most troubling this month is for NFT market. NFT sales are down for the seven consecutive week. Global sales of NFT was down by 17% last week alone. 

Floptober, which is the nickname of the month of October in the crypto industry, is well known for its seasonal negative Impact on the industry. This year the situation is even worse. Large NFT developers like Yuga Labs (Bored Ape Yacht Club Collection) and Proof Collective announced substantial layoffs and adjust their business model.

Yuga Labs said they would be changing the core focus of their business. Instead of building auxiliary games in-house, they’ll now turn entirely to third parties who bring more experience, and allow them to focus on their Otherside metaverse and on the community. To a certain extent they decided to copy more successful Pudgy Penguins business model, where developers are ready to go beyond the crypto community to sell real toys in Walmart and other stores across the United States. Bored Apes would hardly leave you indifferent. Its latest collection prices added 5.3% in October. So, they have a potential to expand their business.

Meanwhile, Bitcoin share in the crypto market is increasing. The major cryptocurrency is not bound to NFTs unlike Ethereum of many other altcoins. Thus, the Bitcoin seems to outperform the market. It doesn’t meant that it has much less reasons to go down. Pro Shares Bitcoin Strategy (BITO) ETF reported capital outflows during the last five weeks. Last time such a long outflow was recorded was in August 2022, when Bitcoin lost 14% extending its losses to 28% in the next three months.

Bitcoin may get some support from the conflict in the Middle East, where Israeli-Hamas conflict suddenly broke out. It created a geopolitical premium in gold and crude prices, and may support Bitcoin prices too for the same reason. The support for the BTC is at $19,000-21,000 per coin. Prices may go down to it once prices would reverse below $26,500-27,000 per coin.

Another shocking news of the week was the testimony of the Caroline Ellison, the former chief executive officer of Sam Bankman-Fried's Alameda Research, a sister company of infamous FTX crypto exchange. When asked about how Alameda Research was planning to repay its debts she said that the company took about $10 billion in FTX customer funds to repay its debts and make investments. "He [Sam Bankman-Fried] was the one who set up these systems that allowed Alameda to take the money and he was the one who directed us to take customer money to repay our loans," Ellison said during her testimony. It is really interesting how many crypto exchanges and its sister/daughter company were planning to act in the same way during their financial unrest. Are they really backed in case such troubles may emerge considering a huge drop of cryptocurrencies prices during the last two years? 

This might be of paramount importance if another season of crypto winter would come. Although, there are many signals that the crypto winters will be soon over. Bitstamp is planning to offer crypto services together with some European banks in the Q1 2024. It is another indication that 2024 may be a good year for the crypto industry.