In recent hours, Bitcoin (BTC) has plummeted as the US Commodity and Futures Trading Commission (CFTC) accused BitMEX of facilitating money laundering and the illegal exchange of cryptocurrency derivatives. An even bigger shock came when the authorities announced the arrest of Samuel Reed, one of BitMEX’s founders.

BitMEX has always been the most popular bitcoin futures exchange, at least until March 2020, when a $ 1 billion mass liquidation on Black Thursday sent the price down below $ 3,750. In recent months, new competitors such as Binance Futures and ByBit have greatly increased their market share.

While the industry expected charges against BitMEX to emerge one day, Reid’s arrest came as an unexpected surprise. Right after the news spread, BTC’s price fell from $ 10,883 to $ 10,437, down 4.11%.

Fortunately, there are several factors that can help Bitcoin recover in the short term. The triggers are the short duration of the current correction, Bitcoin’s previous reaction to regulatory threats, and support for $ 10,500 so far.

Bitcoin is in a rapid and drastic decline in no time
Bitcoin’s price fell by more than 4% in two hours, which usually does not see the level of volatility.

Usually, when Bitcoin drops at this rate, it triggers a series of liquidations. Since many of the futures market trades are used extensively, this leads to a cycle of long contract liquidations, which results in an even greater decline.

This time, the open interest and the futures market volume have decreased significantly. There are fewer leveraged trades open in the market and this reduces the possibility of a large-scale correction.

History shows that regulatory slowdowns are recovery points
Over the years, the cryptocurrency market has undergone many negative regulatory actions taken by governments around the world, but as Bitcoin researcher Vijay Boyabate says, BTC has rebounded strongly after each one.

While the charges against BitMEX may have negative repercussions in the short term, Boyapati said it is likely to recover in the long term. He said:

The Bitcoin market has always reacted negatively to serious exchange problems or government seizures. Historically, this has always been a great opportunity to buy Bitcoin. The Department of Justice’s actions against BitMEX will not be different. ”

The $ 10,500 amount is still an important area of ​​protection
For most of August and September, the $ 10,500 level was a strong support. Bitcoin sometimes falls below this short position, but quickly returns to it, and this shows that traders are confident that the bitcoin price will be higher in the future.

For now, traders are assuming that Bitcoin’s short-term trend remains cautious but neutral over the medium term. Cryptocurrency dealer Cantering Clark wrote:

In the short term, I think this provides excellent opportunities for bilateral trade. Finally, within a week there will be water under the bridge. This place requires short-term attention and responds quickly. ”

Michael Van de Pope, a full-time Amsterdam Stock Exchange trader, shares a similar view. exclude:

People reply, “Don’t you know the Bitmex news? ” “Yes I know. I am also aware of several cryptocurrency exchanges hacks that caused the crash. I am trading levels. The news is lagging 99% due to the lowdown. ”

At the time of writing, bitcoin price has continued to trade inside the symmetric triangle and the $ 10500 level is serving as support. For traders who focus on support / resistance, the price that matters is $ 10,200.

If the price drops below this level, many traders still expect the $ 10,000 chain to support to $ 9,800 as support as buyers buy enthusiastically it will drop to that level during September.

Source: CoinTelegraph

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