Cryptos crumble as regulators “tighten the screws” – Cryptocurrency News
November 22, 2018 4:26 pm
The cryptocurrency universe experienced another meltdown last week, with Bitcoin breaking critical support to touch 13-month lows amid signs US regulators are set to toughen their stance towards digital currencies and Initial Coin Offerings (ICOs). While there may be some more pain in store for coin prices in the short run as greater regulatory scrutiny raises compliance costs, to the extent that this helps legitimize the industry, it could pay dividends down the road.
Most cryptocurrencies are still licking their wounds following a sharp sell-off recently, which saw Bitcoin break below the crucial $5,750 zone that provided reliable support to touch a 13-month low. The moves were seemingly triggered by the US Securities and Exchange Commission (SEC) imposing fines on two firms that failed to register their ICOs as securities, which the watchdog had previously ruled to be mandatory. The news probably fueled speculation that the SEC will take a more aggressive approach in creating and enforcing crypto regulations, which could make life more difficult (or even impossible) for several coin-related projects, as their compliance costs soar.
Potentially contributing to the sell-off, were news that Bitcoin Cash – which was splintered from Bitcoin last year – would undergo another split, this time into three separate coins. This so-called “hard fork” occurs when communities in a crypto project have divergent visions about the future, and so split into different (but similar) versions of that coin. The effects of hard forks on crypto prices differ; it depends on whether the new coins will serve different purposes (positive), or whether they will act as competition to the original (negative). This one has been particularly contentious, even being described as a “civil war” by some, consequently hurting sentiment in the broader crypto market.
Increased regulation is definitely negative for crypto prices in the short term, as compliance burdens rise, the cost of engaging in crypto-transactions rises, and several projects are scrapped. In the bigger picture though, clearly defined rules and regulatory scrutiny also make for a safer and more attractive environment, which may go a long way in helping the crypto industry become more mainstream. Ultimately, legitimizing the market will help to grow it, as investors that were previously hesitant to add cryptocurrencies to their portfolios are now drawn in. In other words, regulation is a painful procedure for coin prices in the short run, and there may well be more pain in store from here, but it will probably pay dividends further down the road.
Looking at Bitcoin technically, the price crossed below the critical support (now turned into resistance) barrier of 5,750 on November 14, which had capped several declines in recent months. Hence, the medium-term outlook is back to negative. Further declines could meet initial support near $4,040, the low of November 20, with even steeper downside moves likely to stall near $2,970 – this being the trough of September 2017. Even lower, buy orders may be found near the July 2017 lows at $1,830.
On the flipside, a recovery could encounter immediate resistance around $5,150, a zone defined by the bottom of November 15. An upside break could open the way for $5,750, the June 2018 low. Even higher, the 100-day simple moving average (SMA) at $6,382 would come into view, ahead of the September 28 peak at $6,840.
The cryptocurrency universe experienced another meltdown last week, with Bitcoin breaking critical support to touch 13-month lows amid signs US regulators are set to toughen their stance towards digital currencies and Initial Coin Offerings (ICOs). While there may be some more pain in store for coin prices in the short run as greater regulatory scrutiny raises compliance costs, to the extent that this helps legitimize the industry, it could pay dividends down the road.
Most cryptocurrencies are still licking their wounds following a sharp sell-off recently, which saw Bitcoin break below the crucial $5,750 zone that provided reliable support to touch a 13-month low. The moves were seemingly triggered by the US Securities and Exchange Commission (SEC) imposing fines on two firms that failed to register their ICOs as securities, which the watchdog had previously ruled to be mandatory. The news probably fueled speculation that the SEC will take a more aggressive approach in creating and enforcing crypto regulations, which could make life more difficult (or even impossible) for several coin-related projects, as their compliance costs soar.
Potentially contributing to the sell-off, were news that Bitcoin Cash – which was splintered from Bitcoin last year – would undergo another split, this time into three separate coins. This so-called “hard fork” occurs when communities in a crypto project have divergent visions about the future, and so split into different (but similar) versions of that coin. The effects of hard forks on crypto prices differ; it depends on whether the new coins will serve different purposes (positive), or whether they will act as competition to the original (negative). This one has been particularly contentious, even being described as a “civil war” by some, consequently hurting sentiment in the broader crypto market.
Increased regulation is definitely negative for crypto prices in the short term, as compliance burdens rise, the cost of engaging in crypto-transactions rises, and several projects are scrapped. In the bigger picture though, clearly defined rules and regulatory scrutiny also make for a safer and more attractive environment, which may go a long way in helping the crypto industry become more mainstream. Ultimately, legitimizing the market will help to grow it, as investors that were previously hesitant to add cryptocurrencies to their portfolios are now drawn in. In other words, regulation is a painful procedure for coin prices in the short run, and there may well be more pain in store from here, but it will probably pay dividends further down the road.
Looking at Bitcoin technically, the price crossed below the critical support (now turned into resistance) barrier of 5,750 on November 14, which had capped several declines in recent months. Hence, the medium-term outlook is back to negative. Further declines could meet initial support near $4,040, the low of November 20, with even steeper downside moves likely to stall near $2,970 – this being the trough of September 2017. Even lower, buy orders may be found near the July 2017 lows at $1,830.
On the flipside, a recovery could encounter immediate resistance around $5,150, a zone defined by the bottom of November 15. An upside break could open the way for $5,750, the June 2018 low. Even higher, the 100-day simple moving average (SMA) at $6,382 would come into view, ahead of the September 28 peak at $6,840.
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