Another harrowing week in crypto saw the arrest of Sam Bankman-Fried and multiple charges against him by the SEC and CFTC. A new US bill was introduced for forcing KYC onto self-custodial wallets, and Canada banned crypto exchanges from leverage and margin trading.
At a glance...
- SBF arrested and sued by SEC and CFTC
- Extreme Binance outflows sparked debate
- The Block CEO resigned amid FTX disclosure
- The battle for self-hosted wallets raged on
- BTC, ETH, and USDT distinguished as commodities
Top Market Trends
- Bahamian officials arrested FTX CEO Sam Bankman-Fried on multiple federal charges filed by US prosecutors. In the same week, SBF was sued by both the SEC and the CFTC and is now held without bail in a Bahamian prison.
- Crypto supporter and VP of EU Parliament Eva Kaili faced allegations of corruption related to lobbying Qatar and was suspended by her party.
- Binance CEO Changpeng Zhao was vocal in defending Binance exchange after BUSD to USDC transfers experienced a liquidity crunch. CZ put forth that fractional reserves in crypto are not OK, and that Binance matches 100% of its customer assets 1:1. CZ went on to say that the only reason there was a liquidity issue with USDC is because they had to wait for a NY bank to open.
- Canada banned leverage and margin trading in crypto on Canadian exchanges but will continue to allow stock investors to leverage up to 70%.
- The CEO of The Block, an Independent crypto newsdesk, resigned this week after revealing he accepted $27 million in buyout loans from FTX.
A tweet by CZ cannot destroy a healthy business. SBF squandered billions with or without the involvement by CZ. I think this is pure delusion https://t.co/td4IVUqDHQ— Benjamin Cowen (@intocryptoverse) December 14, 2022
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Bitcoin price jumped to Tuesday's CPI news signaling waning inflation growth, but then fell from a 5-week high of $18,318.53 on Wednesday. While exchange outflows were alarming in size, the overall sentiment is bullish for BTC as investors HODL their Bitcoin in self-custody.
- BTC net exchange outflows equaled $1.4B in one 24-hour period this week.
- Long-term Bitcoin investors are currently self-custodying a record high 13.9 million bitcoins.
- According to an analyst at VanEck’s ETF and mutual fund manager, Bitcoin could drop to the $10,000 support level in Q1 2023.
BTC - Low Timeframe
At Wednesday's market breakdown, we were waiting to see if price would respect the 1D buy-side liquidity or if it would purge it. We got our answer soon after when the price spiked, grabbing the 1D liquidity and selling off aggressively.
Now that price has begun to move bearish, breaking and retesting below the 50 EMA on the 1H chart, we would naturally expect price to:
- Reach discount prices
- Mitigate a bullish order block in discount
- Close open fair value gaps
- Act as value areas for short- or longer-term longs to take place.
As can be seen, confirmations of these levels through a trend change or manipulation would confirm the bullish value levels to look for longs.
BTC - Macro View
BTC/USD has been in a bullish trend since the 21st of November after taking 1D sell-side liquidity under the $15,500 price level.
Price continued to trend on the LTFs until it took 1D buy-side liquidity above the $18,150 level. We saw price print a strong rejection candle, with bulls unable to close the day's price above the $18,150 level. At the same time, we rejected the 50 EMA on the daily chart, which has been acting as a form of support/resistance when coupled with order blocks, equilibrium, fair value, and buy-side/sell-side liquidity.
This signals bearish pressure entering the market as bulls offload some of their positions and bears see a potential value area for shorts. It remains to be seen whether these shorts are short-term as a pullback in the LTF bull trend or a continuation of the HTF bear trend.
If the market lows formed in November are to be the market bottom, we would likely see a retracement to the $17,000 price level as a value area for continuation longs up into the EQ of the weekly/monthly price range from $25,200-$15,500, where we would expect some form of retracement.
Altcoins on the Move
BNB was down 13.6% and Binance's Trust Wallet token (TWT) was the worst top-100 performer over the last 7 days, down 26.6%. During the week, Binance experienced $3.7 billion in exchange outflows. USDC withdrawals on Binance were temporarily stalled due to demand and not enough liquidity - but CZ assured users that the delay was only due to a bank being closed.
- In an FTX filing, the CFTC stated that Bitcoin, Ethereum and USDT were commodities, citing the meaning of commodities as laid out in the US Constitution.
- Microsoft banned cloud mining (not hardware mining as with Bitcoin) on its cloud services platform, Azure, in a move to improve security.
- Paypal integrated MetaMask’s Web3 wallet for Ethereum transactions so PayPal users can soon purchase ETH on the payments platform.
Unlike BTC/USD, the low printed on November 22nd failed to form a lower low running daily sell-side liquidity, implying that the high on November 10th was our 4H buy-side liquidity.
Price ran this buy-side liquidity, resulting in a false break above the 50 EMA, trapping breakout traders in long positions, who were likely liquidated (a typical manipulation process).
We are now waiting for prices to reach discount levels, match bullish order blocks, and close fair value gaps to position for short or longer-term longs.
- UN Refugee Agency UNHCR partnered with the Stellar blockchain to pilot crypto-based disbursements to Ukrainians in need.
- Illuvium Web3 game studio launched a beta version of Overworld to 30,000 of the 2 million gamers who signed up for the waitlist. Also this week, Polkastarter’s “GAM3 Awards 2022” honored Illuvium with an award for “Best RPG”.
- A BAYC lawsuit named 37 celebrities, including Jimmy Fallon, Kevin Hart and Serena Williams, for their involvement in promoting pricey Bored Ape NFTs.
- Self-custody came under fire this week as US lawmakers introduced a bill requiring KYC for cold storage and Binance CEO suggested that 99% of people are unready to hold their crypto in self-custodial wallets.
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Disclaimer: The content of this article is for general market education and commentary and is not intended to serve as financial, investment, or any other type of advice.