Key Insights
- The SEC has sued Binance, the world’s largest crypto exchange, alleging that it violated securities laws.
- The news of the lawsuit sent shockwaves through the crypto market, causing Bitcoin and other cryptocurrencies to plummet.
- Binance has seen net outflows of over $790 million in the last 24 hours.
- Bitcoin’s quarterly futures have remained below 4% since June 1, suggesting that investor confidence is low.
Bitcoin, the flagship cryptocurrency, has recovered some of its losses after a sharp drop on Monday following a lawsuit served by the U.S. Securities and Exchange Commission (SEC) against Binance, the world’s largest crypto exchange.
According to reports the SEC accused Binance and its co-founder, Changpeng Zhao, of violating securities laws by commingling billions of dollars of investor funds with their own and offering unregistered securities to U.S. investors.
The SEC also alleged that in 13 charges, Binance diverted customer funds, artificially inflated its trading volumes, failed to restrict U.S. customers from its platform and misled investors about its market surveillance controls.
For people familiar with the happenings of the crypto market, this lawsuit serves as the latest in a series of regulatory actions and lawsuits against the crypto industry and the companies in it by U.S. authorities, particularly the SEC.
So far, the SEC has now gone after major crypto platforms such as Kraken, Genesis and Gemini Trust, and has warned Coinbase, the largest U.S.-based crypto exchange, of potential securities charges.
Bitcoin Takes A Fresh Beating
The news of the SEC going after Binance, the largest centralized crypto exchange in the world, sent shockwaves through the crypto market.
Keep in mind that the market had already been under a lot of bearish pressure from a worsening macroeconomic climate, and the recent of other industry giants like FTX and Terra in 2022.
Right after this news, Bitcoin plunged below $26,000 for the first time since March 2023, bringing the $25,000 support into a fresh perspective.
And on Bitcoin’s heels,  other top cryptocurrencies such as Ethereum, Binance Coin (BNB) and Ripple’s XRP followed, suffering massive losses.
As illustrated by the snapshot above, the crypto market is currently trading in red, with Bitcoin, BNB, Solana, Dogecoin and Cardano losing more than 8% respectively over the weekly timeframes.
Binance US Sees Net Outflows Of $790M
According to Nansen on Tuesday this week, Investors have pulled $790 million from Binance and its U.S. affiliate in the last 24 hours, a day after the SEC sued both exchanges.
According to a tweet from  Glaassnode, Binance saw net outflows of $778.6 million of crypto tokens on the Ethereum blockchain, with its U.S. affiliate, Binance.US, registering net outflows of $13 million, the analytics firm said.
Following the SECs 13 civil charges against the leading cryptocurrency Exchange Binance, the Exchange experienced a net outflow of -10.5K BTC, with only 11 trading days recording larger outflows.
However, the current value remains a significant -29.8K BTC (-74%) smaller than the… pic.twitter.com/Qsk8zWTVe3
— glassnode (@glassnode) June 6, 2023
Recall that Binance was also served a lawsuit by the U.S. Commodity Futures Trading Commission (CFTC) in March, for operating what the agency described as an “illegal” exchange and a “sham” compliance program.
However…
Bitcoin’s Derivatives Show Something Interesting
After Bitcoin’s 5% slip to the $25,000 zone, one would expect that other Bitcoin trading products would also decline.
However, the same isn’t true for Bitcoin’s quarterly futures.
Now, there are a few things to know about this Bitcoin derivative
- Bitcoin quarterly futures are contracts that expire every three months.
- They are favoured by big investors and traders who profit from price differences.
- They usually cost more than the current Bitcoin price (about 5 -10% higher than the spot price in a healthy market).
- This happens because sellers want extra money for waiting longer.
- This price difference is expected in healthy markets, and it is called contango.
- Contango happens in other markets too, not just crypto.
Remember how we said that Bitcoin’s quarterly futures usually cost about 5 -10% more than the current Bitcoin price in a “healthy market�
Well, according to this metric, Bitcoin has been showing some mixed signals since June 1, because the quarterly futures remained below 4%. And when the SEC sued Binance, it stood at 3.5%.
Traders should look at options markets to see if the recent drop in Bitcoin price has boosted investor confidence.
More On-Chain Data
According to Glassnode statistics in a recent tweet, 4.6% of the total circulating Bitcoin supply (almost 780,000 BTC) has been bought close to the asset’s current market price.
Around 780K #Bitcoin, equivalent to 4.6% of the Circulating Supply, has been acquired around our current spot price of ~$26.8K.
With such large swathes of Bitcoin concentrated within a tight price range, a move in either direction would send a significant amount of coins into a… pic.twitter.com/1nURzpvO9p
— glassnode (@glassnode) June 5, 2023
Glassnode noted in the tweet, that with such massive swaths of Bitcoin contained inside such a narrow price range, a move in either way would put a considerable number of coins in profit or loss.
This shows how risky the crypto market’s situation is at the moment.
Glassnode, retweeting another post from Research and data analyst, James V Straten, noted that the average person knows what to watch for after being in several bear markets.
After the Binance versus SEC case, short-term holders sold over 21k Bitcoin at a loss, which is close to what happened in the SVB bank runs.
Bitcoin’s Short-Term Price Analysis
Bitcoin last Thursday, ended its worst month of trading since November.
The cryptocurrency traded in a narrow range of between $26,000 and $28,000, finishing with May after taking a -7.9% thrashing.
On the technical front, Bitcoin is trading below its 50-day moving average, but above its 200-day moving average.
Before Bitcoin’s initial dip, the cryptocurrency was about to break through its 50-day moving average and rally further upwards to the $29,600 zone.
However, the cryptocurrency has now entered a rejection from its 50-day moving average and now faces several possible scenarios.
Is a further decline to the bottom impossible?
The answer would be No.
Bitcoin still has a lot of room for further decline.
In fact, technical analysts generally agree that $25,200 may be the key level to watch for Bitcoin on the downside.
What do we have to support this hypothesis?
For one, Bitcoin is trading atop an ascending trendline, and faces a real possibility of a retest, before further bullishness.
This is without mentioning that the trendline is further validated by the 200-day moving average.
The likely play is that Bitcoin will show signs of recovery and retest the 50-day moving average at around $27,750, before another drop to the trendline at $25,200 – $24,800.
Overall, the RSI is hovering around 30, suggesting oversold conditions and indicating that the cryptocurrency is headed for a recovery that may be a genuine one or may only be the stepping stone to a much bigger decline.
Disclaimer: Voice of Crypto aims to deliver accurate and up-to-date information, but it will not be responsible for any missing facts or inaccurate information. Cryptocurrencies are highly volatile financial assets, so research and make your own financial decisions.
