The 4% downturn of Bitcoin after the accusations against BitMEX became known is probably not a long-term threat to the share price.
In the evening hours yesterday, Bitcoin (BTC) suddenly slipped down after it became known that the US Derivatives Trading Commission (CFTC) had brought charges against BitMEX. The crypto exchange is accused of having facilitated money laundering and illegal derivatives trading. The seriousness of the accusations became all the more apparent when Samuel Reed, one of the co-founders of BitMEX, was arrested.
BitMEX was the market-leading trading platform for Bitcoin futures for a long time, before the so-called “Black Thursday” intervened in March 2020, which resulted in massive sales worth $1 billion and lowered the Bitcoin exchange rate to $3,750. As a result, competitors such as Binance Futures and ByBit were subsequently able to secure large market shares.
Crypto experts had long rumored that sooner or later there would be accusations against BitMEX, but the arrest of Reed came as a surprise even for them. The shock also had an impact on Bitcoin’s share price development, as it went down 4.11% for Bitcoin after the announcement was announced. Thus the crypto market leader slipped from 10,833 to 10,437 US dollars.
However, there are several factors that indicate that Bitcoin will recover from this horror, at least in the short term. The main reasons for this are the brevity of the triggered downturn, Bitcoin’s past behavior in legal conflicts, and a strong support at $10,500, which keeps it current.
Is the pain only temporary?
The Bitcoin price has plummeted by more than 4% within two hours. Such a drastic downturn in such a short time is unusual and proof that the news about BitMEX can probably be seen as the trigger.
Usually when Bitcoin falls with such intensity, a kind of domino effect follows, resulting in liquidations. Since most traders in the futures market trade with leverage, a financial leveraging effect, this creates a downward spiral that causes more and more long positions to close and push the price further down.
At present, however, open interest, a measure of the total value of open positions in the market, is relatively low, and the volume of trading in the futures market is much lower than usual. As a result, there are fewer traders trading with excessive leverage who are drastically affected by a downturn.
Government measures no long-term threat
In recent years, the crypto industry has repeatedly had to endure severe setbacks due to the decisions of governments, parliaments and authorities, but as crypto market researcher Vijay Boyapati confirms, Bitcoin has recovered from this again and again.
The accusations against BitMEX could have quite negative effects in the short term, but according to Boyapati it is unlikely that any effect will be felt in the long term:
“Bitcoin has always reacted negatively to serious measures by governments. Historically, however, this has always been a good buying opportunity. The accusations against BitMEX are no exception”.
10,500 US dollars are a strong support
Over August and September, the $10,500 mark has proven to be predominantly strong support. Although Bitcoin had repeatedly slipped below them, each of these downturns were short-lived, demonstrating that investors are confident that the market will continue to rise in the future.
Although the experts see the current share price development as threatening in the short term, it remains neutral in the medium term. Cantering Clarke, for example, writes
“In the short term, I see a good opportunity for both sides. In a week’s time, all this will be over. This market has a very short memory span and will quickly swing back around”.
Michael van de Poppe, a trader at the Amsterdam Stock Exchange, shares this view. So he thinks:
“People ask me: Have you heard about BitMEX? Yes, I have. But I can still remember all those hacker attacks on various crypto exchanges that were the supposed “reason” for a plunge in prices. I prefer to orientate myself on the share price development and on important brands. If one goes after the news, one is in 99% of the cases too late, since there are always Insider. “
At the time of going to press, Bitcoin is still in a symmetrical triangle, with the $10,500 mark acting as a strong support. The $10,200 mark would be the next important support to consider in the event of a downturn.