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| By Alex Benfield |
On Monday, we found out the Commodity Futures Trading Commission is suing the largest crypto exchange in the world: Binance.
That news sent the prices of most cryptos downward to retest support levels.
Since then, the market has rebounded a bit and is mostly back to the levels it was at last week.
This is just the latest step in the 2023 crypto crackdown from U.S. regulators, as Operation Choke Point 2.0 continues to threaten the crypto industry in the U.S.
One silver lining in this latest suit?
The CFTC named Bitcoin (BTC “A-”) and Ethereum (ETH, “B”) commodities. However, there appears to be a growing divide among regulators regarding this topic.
Additionally, a battle seems to be brewing between the Securities and Exchange Commission and the CFTC over who has regulatory domain over the crypto market.
Meanwhile, the rest of us are caught in the crossfire.
The recent escalation in regulatory actions has certainly perked up the ears of many crypto companies.
Although most American crypto companies like Coinbase Global (COIN) and Kraken wish to remain in America, they are likely forming contingency plans for the potential scenario where the current administration exiles crypto businesses.
And there are opportunities overseas for these companies.
For example, after many crypto businesses fled China in recent years, Hong Kong appears to be courting to the industry once again as they likely see an opportunity to gain market share from the U.S.
Over the years, it has been apparent to many Americans in crypto that the U.S. was missing out on an opportunity by not actively supporting this industry. However, things have taken a turn for the worse with Operation Choke Point 2.0.
As a result, it seems like the U.S. may choose to separate itself from the crypto industry entirely … and it is difficult to emphasize how bad of a misstep that move could be.
Despite the recent commotion, the crypto market is showing great resilience, as Bitcoin is back to trading near $28,000 after a brief dip a few days ago.
BTC bounced right off its moving average yesterday, back to the $28,400 level that it struggled to break last week. With all the recent negative storylines, it is easy to see why Bitcoin struggled to build up enough bullish momentum to break out to $30,000.
Rest assured, though, that is the next upward target.
The 200-week moving average — currently sitting near $25,500 — should act as support if price moves lower again.
After such a bullish start to the year, don’t be surprised if the market is heading toward a period of sustained sideways trading.
Click here to see full-sized image.
After briefly testing $1,700, Ethereum is right back to the $1,800 level that it has struggled to break above over the last two weeks. Should ETH break out above $1,850, it is probably a straight shot to the next big target on the upside of $2,000.
Ethereum has a bit of catching up to do, as it has slightly fallen behind Bitcoin. If you look at its chart, it seems that from mid-January until now it has been trading somewhat sideways.
But with the Shanghai upgrade coming in a few weeks, that could be the bullish catalyst ETH needs to break upward to the next level.
Click here to see full-sized image.
What’s Next
After a year of negative headlines and bad news, almost all the weak hands in this market have been shaken out. Now, only resilient holders remain.
The current market participants have conviction in this asset class and are not likely to sell the positions they have held for this long.
However, the crypto market has been hard pressed to find new buyers and an influx of new capital. Many of the institutional buyers are not biting right now due to the worrisome macro backdrop and an unpredictable Federal Reserve.
Additionally, the recent regulatory actions have certainly not helped to coerce the institutions back into this market.
Without more regulatory clarity, it will be hard to bring the institutions back, and it will be difficult for the American crypto industry to grow.
Perhaps the next move up will be retail driven, like the first big rally of this year. The banking crisis could also bring in more retail money as people look for hard assets and safe places to store their wealth.
While the current mainstream narrative seems to be that the banks are fine and that there is no need for further worry, I, for one, am not convinced.
Once again, I ask you all to remain patient as we wait out the storm. And I promise you, clear skies await us.
Best,
Alex
