CFTC's Crackdown on BitMEX Causes FUD – Price Analysis, 5 Oct 2020
On October 1st, the US Commodity Futures Trading Commission (CFTC) filed an action against cryptocurrency derivatives exchange BitMEX and its owners, including co-founder and CEO Arthur Hayes. The authority accused them of running an unregistered trading platform and violating CFTC rules, including anti-money laundering and customer identification (KYC) measures.
The event was an immediate reason for FUD (Fear, Uncertainty, and Doubt) among the crypto users and had a negative effect on the market because BitMEX was supposed to have a massive amount of Bitcoins – approximately 193K BTC or almost $2 billion (roughly 1% of all Bitcoins in circulation), according to CoinMetrics/GlassNode:
The crypto community started to worry if the clients would be able to withdraw their funds from BitMEX. For example, well-known Bitcoin maximalist and co-founder & CTO of Casa Jameson Lopp posted the following tweet:
Luckily, there were no problems with the withdrawals the next day, which calmed down the crypto community and the market stopped declining.
Now the market is stabilizing. At the time of writing, according to Coin360.com, one Bitcoin costs €9,068.27 (+0.86%), one Ethereum – €298.56 (+0.78%), and one LINK – €7.97 (+0.74%):
Source: Coin360.com (Daily crypto market performance)
Now let's have a look at the price charts of the top cryptocurrencies against the euro.
In the 4-hour chart (4H), BTC/EUR has formed a Symmetrical Triangle and is close to its end:
A Symmetrical Triangle is a chart pattern characterized by two converging trend lines connecting a series of sequential peaks and troughs. In Technical Analysis, such kinds of triangles are considered trend continuation patterns, suggesting potential trend renewal once the price exits the triangle.
However, we would like to outline that BTC/EUR is still within the triangle, and there is no reliable signal, indicating that the price is going to break through the upper (resistance) line. It is preferable to wait for a bullish signal to occur before opening a long position.
Moreover, we would like to point out that experienced traders abstain from opening any position in the final third of such kind of triangles, since in this phase, the price behavior may become very unpredictable.
The month of September turned out to be very controversial for Ethereum. As can be seen from the chart below, in the monthly time frame (MN), ETH/EUR couldn't form a Bearish Engulfing because the bearish candlestick for September was neither able to cover the body of the bullish candlestick for August nor able to renew its local low:
However, we would like to mention that throughout most of the second half of September, the body of the bearish candlestick was engulfing the body of the bullish candlestick. The situation changed during the last days of the month: a sign that at the end of the day, the bulls were able to defend Ethereum and not let the bears reverse the trend.
That's why we think that during the current month, there is still a chance that the uptrend may resume.
In the weekly time frame (1W), LINK/EUR formed a Bearish Engulfing last week – a bearish technical pattern, theoretically, indicating that lower prices will come:
Nevertheless, we don't see the current Bearish Engulfing as a reliable bearish signal. First of all, as seen in the chart above, there is a Hammer candlestick before the Bearish Engulfing. Hammers usually occur at the bottom or near the bottom of downtrends (corrections), pointing to a potential trend reversal. Secondly, the local low of the last bearish candlestick couldn't drop below the local low of the Hammer.
All these formations suggest that, probably, in the short term, the bears will continue to put pressure on the price of the cryptocurrency, but a bit later, the bulls will try to trigger another solid price rebound.
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The analysis is purely informational and does not constitute investment, financial, trading, or any other sort of advice and you should not treat any of Bitvalex's content as such. Bitvalex does not recommend that any cryptocurrency should be bought, sold, or held by you. You are solely responsible to conduct your own due diligence and consult an advisor before making any investment decisions.