BTC Faces the Risk of Sub-$26,000 on Regulatory Risk Jitters

Key Insights:

• It was a bearish Monday session, with BTC sliding by 3.04% to end the day at $27,127.
• News of the Commodities Futures Trading Commission filing charges against Binance sent BTC and the broader crypto market into negative territory.
• The technical indicators remain bullish, with $28,500 in view.

On Monday, bitcoin (BTC) slid by 3.04%. Reversing a 1.82% gain from Sunday, BTC ended the day at $27,127.

A mixed start to the day saw BTC rise to an early high of $28,027. Falling short of the First Major Resistance Level (R1) at $28,324, BTC fell to a mid-afternoon low of $26,536. BTC fell through the First Major Support Level (S1) at $27,158 and briefly through the Second Major Support Level (S2) at $26,838 before ending the day at $27,127.

News of the CFTC Suing Binance Sent BTC Into Negative Territory

After a weekend of inactivity, US regulators were back in action on Monday. The Commodity Futures Trading Commission (CFTC) took over the SEC regulation by enforcement mantra and sued Binance for illegally selling crypto derivatives to retail investors.

According to the Monday Court filing,

“Beginning no later than July 2019 and continuing through the present, Binance, under Zhao’s direction and control and with Lim’s willful and substantial assistance, has solicited and accepted orders, accepted property to margin, and operated a facility for the training of futures, options, swaps, and leveraged retail commodity transactions involving digital assets that are commodities including bitcoin (BTC), ether (ETH), and litecoin (LTC) for persons in the United States.”

Binance has been on the radar of US lawmakers and regulators for some time. In March, US lawmakers from both sides of the aisle sent Binance a letter stating,

“Meanwhile, what little information about Binance’s finances is available to the public suggests that the exchange is a hotbed of illegal financial activity that has facilitated over $10 billion in payments to criminals and sanctions evaders.”

Binance CEO CZ responded to the filing, saying,

“Upon an initial review, the complaint appears to contain an incomplete recitation of facts, and we do not agree with the characterization of many of the issues alleged in the complaint.”

The Day Ahead

Investors should monitor updates from the ongoing SEC v Ripple case and Binance and Coinbase (COIN)-related news.

With the SEC in a lengthy battle against Ripple, a long and drawn-out CFTC v Binance case would test investor resilience. A Ripple victory would change the narrative.

The banking sector will also be in the spotlight today. The Committee on Banking, Housing, and Urban Affairs will meet in an open session to conduct a hearing on “Recent Bank Failures and the Federal Regulatory Response.”

While the focus will be on Binance, US economic indicators will also draw interest, with consumer confidence figures likely to provide direction.

Bitcoin (BTC) Price Action

This morning, BTC was down 0.17% to $27,080. A range-bound start to the day saw BTC rise to an early high of $27,147 before easing back.

Technical Indicators

BTC needs to move through the $27,230 pivot to target the First Major Resistance Level (R1) at $27,924 and the Monday high of $28,027. A return to $27,500 would signal an extended bullish session. The crypto news wires should be crypto-friendly to support an extended rally.

In the event of an extended rally, BTC would likely test the Second Major Resistance Level (R2) at $28,721 and resistance at $29,000. The Third Major Resistance Level (R3) sits at $30,212.

Failure to move through the pivot would leave the First Major Support Level (S1) at $26,433 into play. However, barring another crypto event-fueled sell-off, BTC should avoid sub-$26,000 and the Second Major Support Level (S2) at $25,739. The Third Major Support Level (S3) sits at $24,248.

Looking at the EMAs and the 4-hourly candlestick chart (below), it was a mixed signal. BTC sat above the 100-day EMA ($26,398). The 50-day EMA narrowed to the 100-day EMA, while the 100-day EMA widened from the 200-day EMA, sending mixed signals.

A move through the 50-day EMA ($27,327) would support a breakout from R1 ($27,924) to target R2 ($28,721) and $29,000. However, a fall through S1 ($26,433) and the 100-day EMA ($26,398) would give the bears a run at S2 ($25,739). A move through the 50-day EMA would send a bullish signal.