Crypto.com’s CRO is in trouble, but a 50% price rebound is in play

Short CRO traders were paying as much as 3% premium to long traders on Nov. 14, reflecting extreme bearishness in its futures market.

Crypto.com’s native token Cronos (CRO) is showing restraint on Nov. 14 against mounting sell-pressure building in the wake of the FTX’s dramatic collapse last week. Now, the CRO/USD pair is eyeing a watershed price recovery.

On Nov. 14, CRO’s price wobbled between profits and losses, trading around $0.069 a day after crashing to $0.05, its lowest level since April 2020 — that’s a 60% price decline from November’s peak of around $0.178.

*CRO/USD weekly price chart. Source: TradingView*

CRO funding rate drops to -3%

The period of CRO’s price decline occurred alongside a sharp drop in the token’s perpetual futures funding rates.

Funding rates are recurring payments made by traders based on the difference between the prices in the futures and the spot market. A positive funding rate means bullish traders (long positions) pay bearish traders (short positions), representing their confidence about a price rally.

Conversely, a negative funding rate means short traders pay long traders to keep their positions open. On Nov. 14, CRO’s funding rates on Huobi and OKX dropped to minus 3%, showing traders are extremely bearish on the token.

*CRO funding rates history. Source: Coinglass.com*

“This is literally the exact same dynamic that occurred before Celsius and FTX collapsed,” warned Dylan LeClair, senior analyst at digital asset fund UTXO Management on Nov. 13, when CRO funding rates were near minus 2%.

FTX contagion fears spread to Crypto.com

The CRO sell-off started from fears of contagion amid the FTX fiasco, particularly concerns that Crypto.com, a Singapore-based crypto exchange, would collapse in the same manner as FTX.

At the core of these worries is potential insolvency, with analysts pointing out that Crypto.com is holding low-liquid cryptocurrencies like Shiba Inu (SHIB) and its own token CRO as reserves, which reportedly make up 40% of the exchange’s total assets.

4.https://t.co/INIxikfNzy holds $1.6B worth of BTC/ETH/USDT/USDC/DAI/BUSD assets, accounting for 60%.

40% of assets are low liquidity assets.
— Lookonchain (@lookonchain) November 13, 2022

In addition, Crypto.com also moved $210 million worth of stablecoins from Binance and Circle before demonstrating its reserves to the public. Binance CEO Changpeng Zhao confirmed the move, urging caution, the day before CRO dropped to its April 2020 low.

If an exchange have to move large amounts of crypto before or after they demonstrate their wallet addresses, it is a clear sign of problems. Stay away. Stay #SAFU.
— CZ Binance (@cz_binance) November 13, 2022

What’s more, Crypto.com also misconducted a $400 million Ether (ETH) transaction, sending it to a Gate.io exchange wallet instead of its cold storage. Later, the exchange did manage to recover the funds, but that also raised a lot of questions.

Crypto_com CEO is claiming they “accidentally” sent $400 million of their eth to the wrong wallet.

He’s either lying, or 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 to data tracked by Argus Inc.

50% Cronos price relief rally ahead?

Strictly from a technical perspective, however, CRO’s price could nevertheless see a potential relief rally in the coming weeks.

A set of indicators support the said bullish outlook, including CRO’s weekly relative strength index (RSI), which dropped to nearly 30, or nearly “oversold” territory. A similar drop in June earlier this year had preceded a 75% recovery rally from $0.099 to $0.162, as shown below.

The other bullish indicator includes strong historical support of $0.061. In addition, CRO’s current price range of $0.061 and $0.111 has the token’s highest volume profile visible range (VPVR) on record.

In other words, CRO price could recover to $0.111, up over 50% from the current price levels, as its next upside target.

Conversely, CRO/USD falling alongside funding rates suggests that its drop may have been driven by futures markets, which was also the case with Terra’s collapse in May. Thus, the persistent bearish sentiment across the entire cryptocurrency market could dampen CRO’s recovery prospects.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

CRO faces interim sell-off risks at peak

CRO surged by almost 27.50% a day after Crypto.com’s marketing deal and by up to another 20% the next day to reach a record high of $0.627, putting its market capitalization near $13.15 billion.

The Crypto.com token’s upside boom also had it close above its upward sloping resistance level, constituting a broad ascending channel pattern. Bears later returned to confirm the channel’s upper trendline as resistance, but bulls overpowered their attempts, causing the price to rebound higher.

CRO/USD 3-day price chart featuring ascending channel pattern. Source: TradingView

As a result, CRO entered price discovery, underscoring traders’ anticipation that its name on a popular sporting arena would boost its adoption and prices in tandem.

However, sell-off risks were there as its relative strength index entered overbought territory.

CRO/USD daily price chart. Source: TradingView

As a result, CRO showed signs of correction after peaking out on Thursday, suggesting that many traders decided to lock their profits in anticipation that the CRO price rally would not extend any further.

Based on the CRO’s historical price actions, its next leg lower is eyeing the 20-day exponential moving average (20-day EMA; the green wave) — at near $0.37 — as its next downside target. The wave has previously acted as an accumulation zone for CRO bulls after price dips.

Crypto meets sports

Founded in 2016, Crypto.com currently ranks as the world’s ninth-largest crypto spot exchange. In the previous 24 hours, its volumes came out to be $1.82 billion, compared to Binance’s — the top crypto exchange — $31 billion.

Cypto.com also has existing sponsorship deals with the Ultimate Fighting Championship, French football club Paris Saint-Germain, and the NBA’s Philadelphia 76ers. The deals align with similar sponsorships between crypto companies and sports clubs, including BitMEX’s and Binance’s partnership with Italian Serie A clubs AC Milan and Lazio, respectively.

Meanwhile, FTX, whose native token, FTT, has surged by more than 750% this year, became the official crypto exchange brand for Major League Baseball following an announcement this year. The company also bought the naming rights for Miami Heat’s FTX Arena.

CRO Price