Altcoin Slump Deepens After Binance Hack Allegations; Volatility May Rise Around U.S. Midterm Elections

Market Recovery Clouded by Hacking Incident

Ether Falls to About $2,170

XRP Drops to the $1.23 Range; Solana Near $95

Any Rebound May Lack Momentum

Weakness in the altcoin market is deepening after allegations of a major hack at Binance, the world’s largest cryptocurrency exchange. Investor sentiment has yet to recover even after the Federal Reserve’s Federal Open Market Committee delivered a result viewed as less hawkish than expected. Analysts are urging caution, saying volatility could pick up around the U.S. midterm elections.

According to the cryptocurrency industry on Nov. 3, the latest shock to the market was the hacking allegation that surfaced on Oct. 29. Large fund transfers were detected from a Binance hot wallet, raising the possibility of a breach. Blockchain analytics firm Arkham estimated that a wallet believed to belong to the attacker held about $5.7 billion in assets. Binance said it froze $2.54 billion of that amount. Whether an actual hack occurred and the exact scale of any losses remain under investigation.

The altcoin market had already been sliding. According to South Korean cryptocurrency exchange Upbit, Ether, which traded at about $2,600 in early September, recently fell to around $2,170. XRP dropped below the equivalent of 2,000 won and slid into the $1.23 range, while Solana traded weakly near $95. Over the past week, about 265 of the top 300 cryptocurrencies by market capitalization declined. Their average weekly return was minus 9.2%.

Some analysts say any rebound in altcoins is likely to be weaker than Bitcoin's. In a weekly research report, Bitfinex said that even if the market rebounds, Bitcoin will probably rise first, with altcoins trailing later. If the market declines again, altcoins could suffer losses twice as large as Bitcoin's.

The macro backdrop is also weighing on sentiment. The latest FOMC decision was viewed as less hawkish than expected because the Fed did not strongly signal further rate increases. Even so, rising oil prices and persistent inflation pressures were not enough to revive appetite for altcoins.

Uncertainty over U.S. crypto regulation is also weighing on the market. Senate discussion of the Clarity Act, a bill on crypto market structure, has been delayed, while the U.S. Treasury Department, the Securities and Exchange Commission and the Commodity Futures Trading Commission continue refining the regulatory framework. Policy uncertainty around the U.S. midterm elections and stock-market volatility are also among the factors likely to drive the market's near-term direction.

There are also calls to brace for further downside. Crypto analyst Benjamin Cowen said that while the Fed held rates steady, producer prices recently came in higher than expected and rising oil prices could push inflation higher again. Even if Bitcoin rebounds, the market could still retest its lows in the fourth quarter.

Kang Min-seung, Bloomingbit reporter