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Bitcoin prices are slipping lower from their recent peak near $28,500.
Dan Kitwood/Getty Images
Bitcoin
and other cryptocurrencies fell Tuesday as sentiment among digital asset traders turned more cautious after news that Binance, by far the world’s largest crypto exchange, is being sued by U.S. regulators. That’s not the only reason for the declines, however.
The price of Bitcoin has fallen 4% over the past 24 hours to $26,800, the lowest consistent price for the largest crypto in almost two weeks, when its latest rally picked up steam and carried prices to around $28,500, the highest level since last June. The recent slip is just a blip in an otherwise bullish streak, with Bitcoin up from $16,500 at the start of the year amid a rally that has sparked calls of a new bull market.
“The decline was triggered by the CFTC’s surprise lawsuit against Binance,” said Alex Kuptsikevich, an analyst at broker FxPro. “Investors should ask themselves again: Are my funds safe? If banks are a risk, crypto exchanges are an even more significant risk.”
Indeed, the Commodity Futures Trading Commission on Tuesday sued Binance and its co-founder and CEO, Changpeng Zhao, alleging they violated rules requiring futures and other derivatives be traded on regulated platforms.
Binance is systemically important to the digital asset landscape and is home to one of the most liquid and influential Bitcoin futures markets, so this latest headwind from U.S. regulators represents a strike at the heart of global crypto trading activity.
But that might not be the only factor driving prices lower in the short term.
MicroStrategy
(ticker: MSTR), a software company chaired by high-profile Bitcoin bull Michael Saylor that owns significant amounts of digital assets, revealed on Monday that it had purchased another tranche of Bitcoin—6,455 coins for around $150 million.
“An adverse market reaction following MicroStrategy purchase announcements is typical, with Bitcoin averaging -2.2% on MicroStrategy announcement days. The average 7-day return is more balanced at -0.2%,” analysts at digital asset market research group K33 Research wrote in a note.
The Binance and MicroStrategy news is more than enough to occupy investors, but crypto traders would also do well to keep an eye on the stock market.
The shifting outlook around interest rates means Bitcoin continues to be sensitive to macroeconomic forces and moves in the
Dow Jones Industrial Average
and
S&P 500,
since higher rates dampen demand for risk-sensitive assets. While traders will likely have to wait until Friday for the next major macro catalyst, Tuesday sees the release of economic data covering trade, inventories, and consumer confidence, with public remarks from a Federal Reserve official also on the docket.
In the meantime, the dynamics that drove Bitcoin up to its recent peak near $28,500—and held it above the key $25,000 zone—look to have shifted the outlook for prices in the immediate term based on market technicals.
“Bitcoin has confirmed a breakout above former resistance of around $25,200 in a positive intermediate-term development, suggesting a base is in place. We move to a neutral long-term bias,” said Katie Stockton, managing partner at technical research firm Fairlead Strategies. “Former resistance, near $25,200, is now initial support for Bitcoin.”
Beyond Bitcoin,
Ether
—the second-largest crypto—lost 2% to $1,730. Smaller cryptos or altcoins were more mixed, with
Cardano
flat and
Polygon
slipping 3%. BNB, the native token of the Binance exchange, tumbled 6%. Memecoins were also weaker, with
Dogecoin
and
Shiba Inu
each shedding 2%.
Write to Jack Denton at jack.denton@barrons.com
