Source: PaxForex Premium Analytics Portal, Fundamental Insight
The cryptocurrency sector remains under intensifying bearish pressures following the bankruptcy filing of one of its most-trusted members, FTX. The cryptocurrency exchange tumbled firm valuations of $32 billion+ into bankruptcy in only a few weeks. FTX, founded and led by the inexperienced Sam Bankman-Fried, who has since stepped down, touted itself as a rescuer for failed cryptocurrency firms, boasting it had a $1 billion war chest to bailout struggling firms that could pose contagion risks to the industry. FTX offered assistance to failed ventures, including BlockFi and Voyager Digital Assets, but could not secure its bailout months later.
The Royal Bahamas Police Force and the Securities Commission of The Bahamas launched investigations against FTX. Three of its key personnel, including Bankman-Fried, are under supervision due to pending criminal misconduct charges. FTX had roughly $900 million in assets versus $9 billion in liabilities, but the past week revealed questionable practices at FTX. The bankruptcy filing includes 130 associated companies, revealing a net of companies that transacted between each other, which may have inflated activity and valuations.
Traders will focus on the mysterious hack that saw between $515 million and $650 million transferred out of FTX, and an insider job appears more likely than an outside hack. Customers may feel angry about the instance, but it is nothing compared to the $10 billion of customer funds Bankman-Fried transferred from FXT to his trading firm Alameda Research. Insiders claim between $1 billion and $2 billion are unaccounted for. FTX appears more of an embezzlement scheme and fraud, and the fallout of its collapse will provide a downside catalyst for months to come.
Adding to woes for the cryptocurrency sector, Crypto.com “accidentally” transferred 320,000 Ethereum tokens, or 82% of its reserves, to Gate.io three weeks ago and kept quiet until a user found the transaction in the ledger’s history. Crypto.com received its tokens back, but it smells of a well-known practice of faking network activity and usage. Binance CEO Changpeng Zhao, who oversees the world’s largest cryptocurrency exchange and walked away from an FTX bailout, issued a rightful warning to clients of Crypto.com. Cryptocurrency enthusiasts should prepare for a freezing crypto winter, with price pressures to the downside.
The forecast for the ETH/USD remains bearish following the breakdown in this cryptocurrency pair below its narrowing Ichimoku Kinko Hyo Cloud. Volatility could temporarily increase with the Tenkan-sen and the Kijun-sen merging during a sideways trend before the bearish crossover materializes. Traders should monitor the CCI, which recorded a lower low in extreme oversold territory before drifting higher. A false breakout above -100 may follow, but this technical indicator is likely to remain below zero, confirming the strength of bears and suggesting more downside. Can bears continue to force the ETH/USD into a retreat until price action reaches its horizontal support area? Subscribe to the PaxForex Daily Fundamental Analysis and earn over 5,000 pips per month.
Should price action for the ETH/USD remain inside the or breakdown below the 1,065 to 1,280 zone, PaxForex recommends the following trade set-up:
- Timeframe: D1
- Recommendation: Short Position
- Entry Level: Short Position @ 1,185
- Take Profit Zone: 745 – 885
- Stop Loss Level: 1,370
Should price action for the ETH/USD breakout above 1,280, PaxForex recommends the following trade set-up:
- Timeframe: D1
- Recommendation: Long Position
- Entry Level: Long Position @ 1,370
- Take Profit Zone: 1,490 – 1,555
- Stop Loss Level: 1,280
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