Ethereum’s downtrend is far from being over as more exchanges offer high interest rate to those who are willing to short
The centralized exchange FTX could be one of the biggest sources of selling pressure on Ethereum and other cryptocurrencies by funding traders who are willing to supply their coins in exchange for a high APY. Such a strategy creates massive pressure on an asset that is already struggling to hold 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 demand for long and short assets on the platform. For example, when Terra (LUNA) entered the death spiral with the UST stablecoin, FTX offered up to 18,000% APY to those who deposit LUNA that can be used to short.
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 fell to 0, which could be the fate of any asset that enters a similar death spiral that is further twisted 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 inflow and buying power in Ethereum and the crypto market in general are two main reasons preventing ETH from entering a rally in the market. At press time, the second largest cryptocurrency is trading at $1,142.
