(Kitco News) - Yesterday’s bounceback in the crypto market is looking increasingly like a “bull trap” as widespread weakness returned on Friday after cryptocurrency exchange FTX – which was the main source of turmoil in the markets this week – filed for Chapter 11 bankruptcy.
Investors are now digging to discover which firms are likely to be the most impacted by the fall of FTX, and with the data showing that its ties are quite extensive, the possibility of an extended downturn is looking more probable with each passing hour.
Data from TradingView shows that Bitcoin (BTC) was holding near support at $17,500 prior to the FTX bankruptcy announcement, but plunged to a daily low of $16,260 as the news broke. At the time of writing, bulls have managed to bid it back above $16,800 where they are now battling it out with bears for control of the price action.
BTC/USD 4-hour chart. Source: TradingView
The weakness early on was spotted by Kitco senior technical analyst Jim Wyckoff, who noted that “bulls continue to struggle to stabilize a still-shaky market that saw BC prices this week plunge to a nearly two-year low.”
As it stands now, “bears have the solid near-term technical advantage to suggest still more downside price pressure in the near term,” Wycoff concluded.
A survey of popular analysts on Twitter confirmed this outlook, with the vast majority seeing FTX’s bankruptcy filing as a sign that the market is headed for an extended downturn.
A #BTC Bull Market will take place one day
— Rekt Capital (@rektcapital) November 11, 2022
But today is not that day$BTC #Crypto #Bitcoin
The other major takeaway is that the crypto industry really needs to have regulations put in place that can help protect investors following the second major contagion event of 2022.
“This week’s FTX crisis underlines the urgent need for robust crypto regulation internationally,” said Damian Scavo, CEO and founder of Streetbeat, adding “Retroactive litigation does nothing to protect consumers, or the market, and a lack of regulatory clarity can drive investors offshore.”
“Government bodies in the US, and globally, must create standards for a centralized crypto exchange and fund committees for regulation to ensure consumer assets are protected,” Scavo said. “As many people, including Streetbeat, have warned, a crisis like this could have been avoided through creating regulation around the listing of assets in the exchanges.”
Stocks up, cryptos down
Traditional financial markets were largely able to brush off Friday’s FTX developments and post positive gains for the day. At the close of markets, the S&P, Dow and Nasdaq all finished in the green, up 0.92%, 0.10% and 1.88% respectively.
The same cannot be said for the altcoin market as most tokens resumed their downtrend on Friday.
Daily cryptocurrency market performance. Source: Coin360
As usual, a few tokens managed to move against the herd and post positive gains for the day including a 10.93% gain for dYdX (DYDX), a 10.71% increase for MX Token (MX), and an 8.13% gain for Aragon (ANT).
The overall cryptocurrency market cap now stands at $848 billion, and Bitcoin’s dominance rate is 37.9%.
