Key Talking Points:
- Cryptocurrencies build on yesterday’s gains
- Vebitcoin ceases operations after facing financial strain, the second crypto exchange to collapse in Turkey in a week
- Ethereum on the verge of consolidating a head-and-shoulders pattern
Bitcoin is pushing higher this morning building on yesterday’s surge of over 10%, giving buyers some breathing room after falling more than 25% in 10 days. As I mentioned in my previous article, the pullback in cryptocurrencies wasn’t something out of the blue, with Bitcoin having dropped over 15% on two prior occasions since mid-February.
The daily chart shows how my predictions were not far off when I was trying to pinpoint the lower bound of the corrective range. After slipping below the $50,000 mark, support quickly showed up around the $47,000 area, after a hammer candlestick on Friday was starting to signal that selling momentum was weakening. But it is likely to be an uphill battle from here, especially as many investors are likely to have been spooked out given the higher tax regime proposed by President Biden.
But not only are investors’ concerns about taxes on capital gains keeping cryptocurrencies subdued, as news broke out last night that a second crypto exchange in Turkey has collapsed. The platform, Vebitcoin, said in a brief statement on its website that it has ceased all activities after facing financial strain. It is reported that Vebitcoin had almost $60 million in daily trading volume prior to its collapse. This comes just days after Thodex announced it was going offline, with its CEO reportedly leaving the country, and leaving customers over 2 billion dollars out of pocket.
Many Turks are turning to cryptocurrencies as a way to protect their savings from soaring inflation, but President Erdogan has called for strong regulation, with Turkey’s Central Bank banning digital coins as a method of payment given their concerns of fraudulent activity.
The announcement of the ban is thought to be one of the triggers that caused the strong correction in the crypto space seen over the last 10 days. Although it is hard to pinpoint it to one factor, especially as the market was showing strong overbought conditions, one could argue that the issues crypto exchanges are suffering in Turkey could spill over into the broader market and spark further correction in the short-term, as investors are left worrying about possible de-regulation.
BTC/USD Daily chart
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Ethereum is also building on yesterday’s gains, currently trading at $2,555, which is just $89 from its all-time high. The Fed’s 2-day monetary policy meeting this week is likely to attract investor’s attention as the surge in cryptos has been aided by a low-interest environment. There is no expectation that policy will change at this week’s meeting but a more hawkish Fed is a possibility, and this may see Ethereum and other digital coins correct lower again.
The 4-hour chart seems to be showing some sort of head-and-shoulders pattern. If price is able to consolidate above the $2,550 mark then the pattern will be invalidated and further gains are likely. But if resistance holds and we see price revert lower from the neckline, then a pullback towards the 50% Fibonacci retracement at $2,105 may be on the table.
Ethereum 4-hour Chart
— Written by Daniela Sabin Hathorn, Market Analyst
Follow Daniela on Twitter @HathornSabin