Bitcoin Bulls Suffer Blow Thanks to Bitfinex and its Tether Machinations

BTCUSD Chart 2019-04-29

Not even a week ago, Bitcoin bulls were flexing their muscles around the $5.6k mark. With scores of short- and long-term technical indicators flashing green, it looked like the $6k psychological resistance would fall before the end of the month.

All that went up in smoke in the wake of a court order served by the New York Attorney General’s office to Bitfinex, in connection with the exchange’s manipulation of Tether.

It has always been rather obvious that technical analysis is only good for crypto price prediction as long as there are no solid fundamentals in play. This truth has once again been laid bare this week, when a fundamentals-based blow crashed the price of the top crypto, right in the face of the bullish technical picture.

Cryptocurrency exchange Bitfinex has apparently lost some $850 million, under undisclosed circumstances. It then covered the said loss from its stablecoin operator, Tether.

The impact of the revelations coming from the New York Attorney General was surprisingly poignant. The crypto community has known about the shady dealings surrounding tether for quite some time now. Thus, it was hardly a surprise to see it all made official.

The drop – as sudden and steep as any we’ve seen before – took the price below the 50-week MA, situated at $5,477. Thus began the invalidation of the previously prevailing bullish setup.

History tells us that such a move is likely to be followed by a massive sell-off. That is what happened in the June of 2015, under eerily similar market conditions. And that is what seemed to be getting afoot in this instance as well. Fortunately, in the two days following the drop, the bleeding was successfully contained.

The price only dropped under $5.1k once, very briefly. The bulls fought back valiantly, and the crucial support level of $4,998 was never reached.

What that means is that the short-term bulls are back. If the price manages to stay above this support, the short-term bullish outlook may quickly morph into a long-term one.

In the wake of the drop, the RSI began to draw a bearish divergence. All that has been invalidated however and we are now looking for the price to rebound all the way to $5.6k and above.

BTCUSD Chart 2019-04-29

On the downside, if the bulls fail to get going again, the indicator to watch will be the 50-day MA, which is ascending and which may turn out to be a stiff support around the $4,572 mark.

What about the “other” fundamentals?  

What does the news flow tell us? Though still dominated by the Bitfinex debacle, the news have been turning slightly bullish over the last day or so as well.

With the crypto ecosystem’s main stablecoin once again facing deadly peril, Paxos issued some $10 million worth of Standard coins. In a clear move to fill the likely void left by Tether, the company minted the said amount of stablecoins as a response to increased demand.

Some four transactions accounted for the sudden Paxos Standard minting-spike, all of which came through after the Bitfinex news dropped.

The USD Coin, issued by the consortium of Circle and Coinbase, also saw a similar spike in demand.

Whatever happens to Tether, it is clear that the industry can indeed fulfill its own need of stablecoins.

In later news, Paxos made it clear that it was getting ready to issue $100 million worth of stable coins on the Ontology blockchain. The partnership is meant to offer users of the ONT token a regulated fiat gateway.

Paxos Standard is a regulated USD-pegged stablecoin.

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