Today the day started with a nasty surprise for Bitcoin and Ethereum holders, with the price dropping more than 4%.
It all started yesterday, when after the US stock exchanges opened, news began to spread that crypto bank Silvergate was losing half of its market value in a single session.
The fact is that Silvergate was a supplier to many exchanges, primarily including Coinbase, and this put some fear into investors. Indeed, for example the same Coinbase stock on the exchange had opened with -11% in the first hour of trading alone.
However, over the course of the day many exchanges, including Coinbase itself, distanced themselves from Silvergate, so much so that the problem seemed to be winding down, with the stock of the US-based exchange eventually closing with an unceremonious -1.5%.
Indeed, up to that point Bitcoin and Ethereum prices had not reacted badly, with BTC at $23,400 and ETH at $1,640.
The statements of the SEC chairman bring down the price of Bitcoin and Ethereum today
Shortly after the US markets closed their daily session, news came out that SEC Chairman Gary Gensler had stated that crypto exchanges cannot be considered qualified custodians, in other words, secure.
Gensler was referring to all crypto exchanges, but particularly those that claim to be secure, such as major exchanges.
He wrote:
“Make no mistake, again: Based upon how crypto trading and lending platforms generally operate, investment advisers cannot rely on them today as qualified custodians. To be clear: just because a crypto trading platform claims to be a qualified custodian doesn’t mean that it is.
When these platforms fail—something we’ve seen time and again—investors’ assets often have become property of the failed company, leaving investors in line at the bankruptcy court.”
These statements are indeed the reality of the current state of the crypto markets, and written by the SEC Chairman they carry their weight.
However, it is worth noting that the price of Bitcoin and Ethereum did not start falling as soon as this news was released, but about two hours later.
The cause of today’s descent by the price of Bitcoin and Ethereum
The fact that yesterday’s descent of the price of Bitcoin and Ethereum happened practically within a quarter of an hour would suggest that some single event happened shortly before, and that it triggered sudden and massive selling.
The only event that would seem to have triggered the sales is the news of Gensler’s statements, but the timing does not match.
It is therefore possible that the general trend was simply downward, but that some event was required to trigger some fear by convincing speculators to sell.
And so within about 15 minutes, the price of Bitcoin fell from $23,400 to $22,400, and then even fell below $22,000 in the following half hour, but for very few minutes.
Ethereum’s price in the same period fell from $1,640 to $1,560, before making a very quick hike to $1,540 and later returning again to around $1,560.
It is worth noting that in the next eleven hours virtually nothing more happened, in the sense that the two prices began to lateralize around $22,400 and $1,560, respectively.
It is as if they were waiting for nothing more than to fall to these levels, and they did so suddenly two hours after Gensler’s statements were published.
Not least because, to be fair, what the SEC chairman is calling for could be good, not bad, for the crypto markets, particularly for the very investors who may have panicked and sold out yesterday.
Gensler, referring to a new regulatory proposal for crypto markets, wrote that the new safeguard rule would expand the safeguards of the custody rule to cover all assets and would make important improvements to the protections provided by qualified custodians.
In other words, he called for greater protection for investors and speculators against, for example, fraudulent, or unsafe exchanges that can fail at any moment causing them huge potential losses.
The current cycle
Over the medium term there seems to be a real cycle underway for the price of Bitcoin, which is also shared by the price of Ethereum.
At the beginning of the year there was an initial rise, from $17,000 to $21,000.
Starting on 21 January there were four unsuccessful attempts to bring itself firmly back above $24,000, followed by ten days of lateralization below $23,000.
After returning above $24,000 in mid-February, Bitcoin’s price then failed four times to break above $25,000.
Starting on 22 February, it began a phase of apparent lateralization below $24,000 that resembles that of early February.
Should this phase end like the previous one, it is possible to imagine that after about a week below $23,000 the price of Bitcoin could return to try to attack $25,000.
