As Bitcoin Returns Above $10,000, BitMEX Faces Federal Probe and China Rules in Favor of Crypto Ownership
Bitcoin’s long unwind from 17-month highs continued this week, with prices testing the $9,000 support for the first time in over a month. Then, something unexpected happened: Bitcoin gained $1,000 in the span of several minutes, propelling prices back above $10,000 on Thursday.
The cause of this bitcoin ‘hail mary’ is unclear, though some analyst speculate that it may have been another short-squeeze wiping out the bears. In any event, the rally was contagious, helping altcoins and tokens recoup some of their brutal weekly losses.
Bitcoin Regains Footing, but Still Down for Week
Despite a valiant recovery attempt on Thursday, bitcoin’s price is still down more than 12% for the week. The largest cryptocurrency ran into resistance at $13,000 as the bulls failed to extend their exhausted rally beyond this point on two occasions.
Bitcoin is still up more than threefold since December, which marked the beginning of the new four-year cycle. But even new bull markets go through phases, such as accumulation, correction and consolidation. Bitcoin went parabolic in the spring, corrected more than 30% and is now looking to find a new baseline of support. For now, $10,000 has proved resilient, but analysts aren’t counting out a steeper fall back down to the $8-$9,000 range.
Even with the latest corrective phase, bitcoin’s dominance rate continues to grow. The coin’s share over the overall cryptocurrency market approached 67% earlier this week, the highest in more than two years.
Altcoin Meltdown Intensifies
Bitcoin’s over-sized influence on altcoins and tokens was on full display this week, with alternative assets shedding a combined $25 billion in market cap through Wednesday. Alts would eventually pare their weekly declines, but were still valued at less than $100 billion collectively.
With the exception of Tether’s stablecoin, all of the top 20 altcoins reported huge losses this week. Ethereum experienced the biggest weekly drop among the majors, falling 21.4%. XRP was down 8.6%, Litecoin shed 8.1% and bitcoin cash fell 13.7%.
EOS, Tron, Stellar and Cardano each fell double digits.
BitMEX Under Investigation: Bloomberg
Crypto derivatives exchange BitMEX is being investigated by the U.S. Commodity Futures Trading Commission (CFTC) over illegal client trades, according to a new report from Bloomberg.
Citing anonymous sources familiar with the matter, Bloomberg says the regulator is conducting a monthslong probe to determine whether BitMEX violated rules by allowing Americans to trade on the platform, which isn’t registered with the CFTC.
Cryptocurrencies are considered commodities by the CFTC, which gives the regulator jurisdiction over bitcoin futures and other derivatives products.
Over the past year, BitMEX has emerged as one of the most popular venues for bitcoin trades. Daily trade volumes on the exchange rocketed past $10 billion in May, a new record high.
Chinese Court: Bitcoin Is Property
Despite issuing a blanket ban on cryptocurrency trading, China is willing to guarantee ownership rights to bitcoin, according to a new ruling from the Hangzhou Internet Court.
In a ruling over a bitcoin property infringement dispute, the court said the cryptocurrency should be classified as “virtual property” and protected as such. The ruling has gained the approval of the People’s Bank of China, which told a local newspaper, “Indeed, bitcoin is virtual property, but it’s not fiat money.”
Shenzhen’s Court of International Arbitration already ruled back in October that bitcoin is classified as property and therefore protected under national laws. The Court’s ruling also confirmed the legality of bitcoin payments, which means it is not opposed to owning and transferring digital currency. Read more: In China, Bitcoin Payments Are Legal After All.
The Week Ahead and Things to Consider
After months of parabolic gains and higher highs, bitcoin is finally taking a much needed breather. How markets behave in the short term is anyone’s educated guess, but consolidation wouldn’t be such a bad thing. According to John Kolovos of the New York-based Macro Risk Advisors, don’t be surprised if bitcoin stabilizes around $8,500-$9,000 before heading higher in the long run.
In the meantime, altcoins and tokens are showing no signs of de-coupling from the broader bitcoin effect. The Ethereum/bitcoin cross – an important proxy for altcoin demand – remains extremely bearish. There’s nothing to suggest that will change anytime soon.
Disclaimer: The author owns Bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
Featured image courtesy of Shutterstock. Charts via TradingView and CoinMarketCap.