What happened 

The cryptocurrency market went into free fall overnight after Binance CEO Changpeng Zhao and FTX and Alameda Research founder Sam Bankman-Fried escalated their feud. The fallout has been widespread but there were some key moves among certain digital currencies.

As of 7:30 a.m. ET, FTX Token has fallen 22.7% in the last 24 hours, Solana (CRYPTO: SOL) is down 10.2% and hit a low of $25.51, and Dogecoin (CRYPTO: DOGE) has dropped 13%. The one token that hasn't lost a significant amount of value is BNB (CRYPTO: BNB), which is off 1.8% in the past day.

So what 

Over the last week, a feud between Bankman-Fried and Zhao has erupted. The exact origins aren't clear, but the two have been publicly sparring on Twitter in recent days. A final straw for the market was when Binance said it would sell the $500 million in FTX tokens that it owns. 

Alameda's CEO offered to buy the tokens back for $22 apiece in an over-the-counter deal, but that doesn't appear to have been completed. Late Monday night, the bottom fell out of FTT's price and it appears Bankman-Fried is selling tokens like Solana to buy back FTT and Binance is selling FTT and buying BNB. We don't know exactly whether these trades are being completed by Zhao and Bankman-Fried, but the market is reacting to them even if they aren't. 

Where this gets dangerous for the crypto market broadly is the collateral positions FTX and/or Alameda might have. According to a report from CoinDesk, Alameda has $8 billion in liabilities and much of that may be backed by $5.8 billion in FTT tokens (the value CoinDesk reported before last night's drop). It's not clear the terms of the debt or what the exact collateral is and when positions might be liquidated, but investors are certainly worried. If FTT is used as collateral in a meaningful way and gets liquidated, it could fuel continued selling pressure on the token and send a shockwave across the crypto market. 

The worry about contagion or any insolvency is largely tied to Alameda Research's trading, but FTX is at least tied to the trades because of the FTT token the company owns. It's not clear if FTX has provided any loans to Alameda Research.

Now what 

We only have to look back to the summer of 2022 to see how quickly a leveraged trading firm can cripple the crypto market. The insolvency of Three Arrows Capital eventually cost investors millions and brought down Celsius Networks and Voyager with it.

The big move in FTT tokens is understandable today, but we don't know exactly what Bankman-Fried may be forced to sell if Alameda is indeed in trouble. Alameda had a large position in Solana, which is why that token is down today, but there could be others.

Not only is Alameda a big player in crypto trading, but FTX is a widely used crypto exchange, so there have been a lot of traders moving off the exchange. That could make the declines even worse, which is something for everyone in crypto to watch over the next few days.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Why cryptocurrencies went into free fall overnight appeared first on The Motley Fool Australia.

In perhaps one of the least surprising rallies of all time, Dogecoin (CRYPTO: DOGE) surged more than 100% during the past week based on news that Tesla (NASDAQ: TSLA) chief executive officer Elon Musk, an outspoken Dogecoin proponent, finally completed his takeover of Twitter on Friday, taking the social media platform private after a drawn-out legal process.

Dogecoin has been rallying as its enthusiasts surmise that Musk could make the original meme coin an integral part of the platform, such as enabling its use for payments. This could very well happen, but there's a much larger cryptocurrency that could play a more central role in Twitter's future. Here's why BNB (CRYPTO: BNB), which is up about 20% over the past week, could be the real long-term winner here. 

What is BNB? 

BNB, which until recently was known as Binance Coin, is the native token of Binance, the world's largest crypto exchange by volume. BNB is the fourth-largest cryptocurrency by market cap, with a valuation of $52 billion. 

CZ and Elon 

While Elon Musk's affinity for Dogecoin is well known, it is mostly surface-level, while his ties to Binance and its influential CEO Changpeng Zhao, known simply as "CZ" in crypto circles, runs deeper and may end up ultimately being much more meaningful.

CZ confirms that Binance has invested $500 million in Musk's $44 billion takeover of Twitter, joining a host of other top tech funds and investors.

This makes Binance the fourth-largest investor in the venture, meaning that the exchange has a significant stake in the platform's success and that it should have plenty of influence on Twitter's future endeavors, especially when it comes to incorporating cryptocurrency.

If Dogecoin becomes a means of payment on Twitter, it seems likely that BNB would play some role here as well.

Furthermore, Binance will seek to help Twitter with a number of measures. CZ says that Binance has a team of engineers dedicated to helping Twitter fight bots and that it will work to help Twitter enter the world of web3. 

A spokesperson for the exchange told Decrypt that "Binance is creating an internal team to focus on ways that blockchain and crypto could be helpful to Twitter and actively brainstorming plans and strategies that could help Elon Musk realize his vision".

Burn BNB, burn

As the native token of Binance Exchange, Binance Coin harbors more appeal than Dogecoin beyond their mutual links to Twitter's new ownership.

For example, while Dogecoin is inflationary and has a near-infinite supply, BNB is deflationary because Binance Exchange uses proceeds from the exchange to "burn" or retire a portion of BNB every quarter. Binance has previously committed to using 20% of exchange revenue to burn BNB. You can think of burning as similar to a publicly traded company buying back some of its shares outstanding. Buying back these tokens and taking them off of the market theoretically has the benefit of making the remaining tokens more valuable.

Recently, Binance completed its 21st quarterly burn, torching $547 million worth of BNB. Binance has said that it will continue to engage in these quarterly burns until 50% of BNB is removed from the circulating supply. 

Is BNB or Dogecoin the better buy?

While Dogecoin could very well play a role in the future of Twitter, it looks like BNB is likely to be the better longer-term bet based on its deflationary nature and its central role in the world's largest crypto exchange, which gives it some tangible value and upside as Binance continues to grow. Its deepening ties to Elon Musk and Twitter could also be an interesting catalyst.

Ultimately, BNB and Dogecoin are speculative investments that are best suited for risk-tolerant investors. However, BNB looks like the better long-term investment thanks to its central role in the Binance ecosystem, Binance's Twitter stake, and BNB's superior tokenomics compared to Dogecoin.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Forget Dogecoin, this crypto could be the even bigger winner from Elon Musk's Twitter takeover appeared first on The Motley Fool Australia.

What happened 

Elon Musk has owned Twitter for less than a week and he's already caused volatility to spike in some corners of the crypto market. It's no secret that Musk has long toyed with using Dogecoin (CRYPTO: DOGE) in some way in previous ventures and the speculation is that he'll use it at Twitter, albeit without any facts to back up wild moves. 

That hasn't stopped traders from bidding up potential winners of the Twitter deal on Monday. Dogecoin is up 10.6% in the last 24 hours as of 2:30 p.m. ET but at one time was down 10.3% in the last day, BNB (CRYPTO: BNB) is up 3.8% after falling 5.6%, and Shiba Inu (CRYPTO: SHIB) is up 3.1% after dropping 5.1% at its low. 

So what 

I'll start with what we know to be true. Binance was part of Twitter's funding, contributing about $500 million to the deal. It's not clear exactly what Binance CEO Changpeng Zhao sees in Twitter, but there are many potential opportunities. He said recently that Twitter users could be charged "very easily globally using cryptocurrencies" for services on the app. It's also been widely reported that Twitter's engineers are quickly developing a paid verification system. 

BNB, Dogecoin, and Shiba Inu are all rising on speculation that they could be part of any Twitter payment infrastructure. But there's still no news out from Twitter, Musk, or any of these tokens about any payment infrastructure existing at all. And even if they did, it's not clear that a company like Twitter using a cryptocurrency to get money from one person to another would actually increase the value of the token itself. 

Unsurprisingly, the move in these cryptocurrencies over the past week has been pure speculation, sparked by their association with Musk. But that's part of the cryptocurrency market and that's likely to be the case for the foreseeable future. 

Now what 

Volatility and speculation are part of investing in cryptocurrencies, but the moves in BNB, Dogecoin, and Shiba Inu over the past week have taken that to another level. 

Even if Twitter does begin using cryptocurrencies more, it's likely to start with more conservative cryptocurrencies like USD Coin (USDC), which it is already testing on the Polygon blockchain. The company partnered with Stripe earlier this year to allow creators to take payments in USDC, lowering barriers for international payments. 

There are other blockchains that would be lower cost and more widely accepted than BNB, Dogecoin, and Shiba Inu, which are still relatively niche tokens right now. 

No matter what Twitter's moves are, I'm not sure there's ultimately a lot of value to be added by cryptocurrencies. I don't think the future of Twitter is building a digital economy, but rather moving money more efficiently around the world. Crypto could simply be how Twitter moves its money, not necessarily something users would hold long-term. That's why I think this speculative move is a reason to stay out of these cryptocurrencies until we know more about Twitter's crypto future. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post How Elon Musk caused Dogecoin, Shiba Inu, and BNB to spike again on Monday appeared first on The Motley Fool Australia.

What was once just a market of one is now flooded with other options for cryptocurrency investors. The arrival of meme coins that seem to create millionaires overnight makes it easy to believe that cryptocurrency investments are meant only for the short term. But despite a crowded field, there is one cryptocurrency investors should count on never selling -- Ethereum (CRYPTO: ETH). 

Like Bitcoin (CRYPTO: BTC), Ethereum is a cryptocurrency that changed our thinking about finance in the digital age, but for different reasons. Ethereum is unique from Bitcoin in myriad ways. But one, in particular, is responsible for what is possibly the greatest innovation to result from blockchain and cryptocurrency technologies -- decentralized finance, better known as DeFi.

The new age of finance

The traditional financial world relies on centralized authorities like banks, notaries, brokers, exchanges, and other middlemen who manage and process financial services. Traditional financial processes, such as applying for a loan or purchasing a stock, require some sort of intermediary to conduct the transaction. 

But because of Ethereum and its innovative smart-contract technology, these traditional financial processes are becoming increasingly obsolete. Smart contracts are the backbone of DeFi and are what make Ethereum so unique. Before its creation in 2014, no other cryptocurrency had smart-contract capabilities. The creation of smart contracts allows blockchain developers to customize conditions and criteria for executing particular actions. 

For example, smart contracts could oversee loan agreements and release collateral upon full repayment. Since smart contracts can integrate with other data, they could also regulate agricultural drought insurance policies by automatically paying out if agreed amounts of rainfall occur. 

In addition to their seemingly infinite customization and potential, smart contracts and DeFi could completely upend what we believe traditional institutions' roles are in the financial world. 

One of the most appealing aspects of DeFi is its inclusivity. If you want to utilize a DeFi financial product, all you need is an internet connection. There are no credit bureaus, no brokers, and no loan officers. As long as a crypto wallet is set up, users can trade and move assets anytime and anywhere. 

In addition, all transactions are in real-time and completely transparent. There is no need for banks or brokers to process transactions since they occur near instantaneously on the blockchain. The other perk of the blockchain is that once a transaction is added, anyone with an internet connection can view activity on the network. It doesn't hurt that just about any possibility of tampering or malfeasance is eliminated due to the blockchain's high level of security.

Arguably, the greatest benefit of DeFi is that it is constantly evolving. Applications and projects built on Ethereum are all open-source. That means developers can integrate multiple DeFi apps to create financial products to meet new user demands as they arise. 

The first-mover advantage

Since Ethereum was the first blockchain to possess smart-contract functionality, it holds most of the market share that makes up the DeFi sector. Despite new competitors like Tron (CRYPTO: TRX), Binance Coin (CRYPTO: BNB), and Avalanche (CRYPTO: AVAX) arriving to grab some of the market, they face an uphill battle because Ethereum's grasp on the DeFi economy is unbelievably disproportionate.

We can look at a statistic called Total Value Locked (TVL) to compare the collective value of a blockchain's DeFi ecosystem. Think of it like the market cap of a company. 

Out of the $62.5 billion invested across DeFi as of this writing, nearly $36 billion is on Ethereum's blockchain. The next-closest competitor is Tron, and this blockchain only supports about $9 billion of value. It's not even close. 

The potential long-term value DeFi presents should be heavily weighed by investors, especially considering it's only in its infancy. Those who are optimistic that DeFi can usurp traditional finance should count on Ethereum continuing to dominate for the foreseeable future. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post 1 cryptocurrency to buy and hold forever appeared first on The Motley Fool Australia.