Source: PaxForex Premium Analytics Portal, Fundamental Insight
FTX and the massive fraud underneath it, how the lack of leadership mishandled the company, and customer funds, has set the cryptocurrency adoption and broader cryptocurrency ecosystem back several years. Once valued at more than $32B, FTX assumed a leadership position, especially after the collapse of other well-known market players, offering financial lifelines, buyouts, and a cryptocurrency rescue fund. It took days for FTX to collapse, file for bankruptcy protection, and dismiss its founder and CEO, who has been arrested and awaits extradition to the US. He could face life in prison, as he embezzled customer funds, using them for his quantitative hedge fund, which collapsed alongside FTX and 130+ associated companies.
Bitcoin and most of the cryptocurrency sector faced selling pressure as non-core and fringe participants rushed for the exits or are slowly winding down their exposure. It also includes well-known backers like Tesla and MicroStrategy, who try to do so quietly to avoid further downside pressure. It includes buying Bitcoin to mask it as an active net-long strategy while their overall holdings measured in coins decreases. MicroStrategy claimed it would never sell Bitcoin, and the outgoing transactions to exchanges may be as simple as MicroStrategy engaging in staking. Given how FTX mistreated the trust and capital of clients, time will tell if MicroStrategy began its feared exodus, staked Bitcoin, or merely trimmed its exposure.
FTX accomplished to confirm the fears of regulators and politicians, and it will require changes and time to heal the wounds. Investors should prepare for several crypto winters, summers, springs, and falls. Bitcoin proved it is not an inflation hedge and remains heavily correlated to the financial system. It cannot offer a diversification opportunity in a crisis, as it has collapsed more than any other major asset class. The path and reason forward for Bitcoin are unclear.
The forecast for the BTC/USD remains bearish as this cryptocurrency pair trades below its Ichimoku Kinko Hyo Cloud, which continues its gradual contraction. It also created a fresh horizontal resistance area, providing bears with a platform to pressure price action to the downside. Following a bearish crossover, the Kijun-sen and the Tenkan-sen flatlined, confirming the absence of short-term upside momentum. Traders should monitor the CCI after a rapid collapse from extreme overbought territory into extreme oversold conditions. A false breakout could precede the next contraction in price action, and volatility could increase over the coming weeks as bulls and bears battle for control over the next directional move. Can bear overpower bulls and force the BTC/USD into its horizontal support area? Subscribe to the PaxForex Daily Fundamental Analysis and earn over 5,000 pips per month.
Should price action for the BTC/USD remain inside the or breakdown below the 16,045 to 17,025 zone, PaxForex recommends the following trade set-up:
- Timeframe: D1
- Recommendation: Short Position
- Entry Level: Short Position @ 16,650
- Take Profit Zone: 12,890 – 13,820
- Stop Loss Level: 17,500
Should price action for the BTC/USD breakout above 17,025, PaxForex recommends the following trade set-up:
- Timeframe: D1
- Recommendation: Long Position
- Entry Level: Long Position @ 17,500
- Take Profit Zone: 18,330 – 18,650
- Stop Loss Level: 17,025
Open your PaxForex Trading Account now and add this currency pair to your forex portfolio.
