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(Kitco News) - Financial markets got off to a volatile start this week, as the crypto ecosystem took a hit after the Commodities Futures Trading Commission (CFTC) filed a lawsuit against Binance for allowing U.S. citizens to use its exchange. Meanwhile, movement in bank stocks led to a choppy day for equities.
The day started on a positive note for the stock market, with the major indices opening higher in the early hours, only to trend lower in the afternoon, resulting in a mixed close. The S&P and Dow finished in the green, up 0.16% and 0.60%, respectively, while the Nasdaq recorded a loss of 0.47%.
Data provided by TradingView shows that Bitcoin (BTC) bulls were supporting the price at $28,000 until the CFTC lawsuit against Binance prompted a rapid sell-off that drove the top crypto to a daily low of $26,675. Bullish reinforcements arrived soon after and managed to bid the top crypto back above the $27,100 support level.
BTC/USD 4-hour chart. Source: TradingView
While many are concerned that the weakness seen in BTC recently is a sign that the market is headed for another winter period, Kitco senior technical analyst Jim Wyckoff sought to reassure crypto traders in his morning Bitcoin update, saying, “The recent pause in prices at higher levels is not bearish.
According to Wyckoff, "Bulls still have the firm near-term technical advantage amid a price uptrend still in place on the daily bar chart," suggesting that there is "more upside likely in the near term."
A possible pullback to the low $20k’s
Digging deeper into the technical data, analysts at Eight Global noted that BTC has “reached the 0.236 fib retracement level on the weekly chart and has stayed close beneath it since.”
BTC/USD 1-week chart. Source: Eight Global
“A moderate pullback, at least towards the weekly 8EMA (around $25.3k) can be expected,” the analysts wrote while acknowledging that “A break through the 0.236 fib level without any pullback would be quite unusual, but we seem to be living in unusual times.”
When it comes to the daily chart, Bitcoin has been consolidating beneath the $29,000 - $31,300 range but has managed to keep candle closes above the green trendline shown on the chart below.
BTC/USD 1-day chart. Source: Eight Global
“As long as this trend continues, we should eventually see a break into the above range,” Eight Global said. “If this move will occur in a sustained manner, I would expect the price to range (consolidate) for a while there as well before then making a decision of breaking up towards $34.6 - 37.5k, or back down towards a lower support test.”
The analysts cautioned that if Bitcoin manages to climb to $30,000, it could initially be rejected at that level due to a large number of sellers waiting in that region.
“If that is the case, we will have to see where buyers will step in to catch the price,” they wrote. “The first being the green trendline, and potential higher timeframe support beneath us (in case the green trendline loses support) comes in at around $24 - 25.4k, and then $21.8k and the yellow trendline. Each area is a place to potentially look for longs.”
Altcoins consolidate
The negative Binance news took almost all of the momentum out of the crypto market, resulting in all but a handful of tokens in the top 200 seeing red for the day.
Daily cryptocurrency market performance. Source: Coin360
The only major exception of note was Joe (JOE), which gained 16.71% to trade at $0.5217, while Liquity (LQTY), XRP (XRP) and UMA (UMA) put on gains of roughly 6%.
The overall cryptocurrency market cap now stands at $1.13 trillion, and Bitcoin’s dominance rate is 46.3%.
