Investing.com – Sheer panic ruled the crypto markets yesterday. Investors and experts are wondering how the dramatic price slump could come about, which led to extreme price losses on Tuesday , and led and a total of more than $ 400 billion total market capitalization within minutes.
QCP Capital, an association of crypto traders, led the flash crash was due to regulatory fears that forced over-leveraged retail investors to exit their positions.
For one thing, the market has priced in an early approval of a Bitcoin ETF too aggressively. Some market watchers expect such a product as early as October. However, QCP cannot fully understand what these optimistic expectations are based on.
Approval of an exchange-traded Bitcoin fund (ETF) on US soil is considered the ultimate accolade for the still young asset class. Then cryptocurrencies might finally be accessible to the masses.
“It is clear that news related to an ETF will continue to play an important role in the overall mood,” said the Twitter thread.
An impending lawsuit by the SEC against the crypto exchange Coinbase (NASDAQ 🙂 probably also caused uncertainty. The US Securities and Exchange Commission has targeted a planned offer in which users can lend crypto assets and collect interest for them. The SEC apparently evaluates this as a security. Coinbase itself sees it very differently. The start of the Lend program has therefore been postponed to at least October, as Chief Legal Officer Paul Grewal announced on the company blog.
“If a regulated US entity that offers a product that is already legally offered in the US is exposed to such tough measures, then nobody is safe anymore,” judges QCP.
“The lending market is a huge risk if it collapses – but that’s not our baseline scenario and it looks like the SEC can bark but not have the nerve to bite.”
In addition to the regulatory risk, technical factors also played a major role in yesterday’s flash crash. Not only was the fact that puts on Bitcoin were more expensive than calls when the cryptocurrency rose to new intermediate highs, according to QCP, was “strange behavior for a bullish market,” but also the fact that the open interest hit new all-time highs on it like before the crash in May 2021, gave the impression that something was wrong.
What’s next for Bitcoin, Ethereum and Cardano?
The crypto trader Michaël van de Poppe has an answer to this question. Steep drops are in bitcoin’s DNA, he said. At the same time, he emphasized in a video that the bullish structure of the market is still intact.
“We have seen this behavior of the market in every cycle. So this chain reaction downwards is essential to take the weak hands out of the market in particular. All these long positions on the underside have to be cleaned up, the FOMO phenomenon has to be be wiped out to flush everyone out of the market before prices turn … “said the crypto-analyst.
“Should we [bei Bitcoin] recapture $ 46,700, the structure would be preserved. So higher lows can still be formed. For me, the $ 46,700 to $ 47,000 range has a very special meaning. If a closing price above the previous support zone of $ 49,000 succeeds, this correction is over in my opinion … “
For Ethereum, the analyst identifies a very crucial support zone from where his rise can continue.
“If Ethereum closes above $ 3,400, we are pretty sure that the bottom has already been broken and the price will orientate itself upwards again from here. If you take a closer look at the price structure of the past, you will quickly see that it is has given such wash outs a number of times. “
According to van de Poppe, there have always been crashes and drastic pullbacks in the market for cryptocurrencies. After that, the markets would have flipped the switch again and again. According to the analyst, the long lower shadow that was formed yesterday is particularly promising. “This makes it clear that market participants continue to have an interest in the asset.”
At Cardano, van de Poppe sees strong support at $ 2.00. However, for the uptrend to continue, it would have to close above $ 2.45.
“Most likely we will see a bullish continuation, especially if Cardano closes above $ 2.45.”
High volatility ahead
Delphi Digital, on the other hand, has warning comments in store for its customers. After a liquidity crisis in which $ 4 billion and $ 3.6 billion in open interest in or ETH were destroyed in a single day, high volatility can still be expected, according to the analysts of the blockchain analysis company in a press release.
“Yesterday long positions were closed out. This means that whales are buying up BTC cheaply from leveraged traders who have taken over themselves. It is not uncommon for larger market participants to force liquidations in order to push the price down to a level that is attractive to them. so that leveraged positions have to be reduced in a cascading manner. The background to this approach is to generate a large amount of liquidity in order to specifically buy BTC below its fair value. “
Crypto whales are entities that, with their investments, dominate the relatively young crypto market at will.
“The realized volatility is now increasing, so it is entirely possible that the market will find itself in a phase of consolidation. However, the short-term volatility would also increase if the market were to make a brilliant comeback to the highs from the beginning of the month. How Be that as it may, it looks as if we are facing a phase of high volatility – we have to be prepared for that. “