Binance Is Not The Only Reason Why Bitcoin And Other Cryptos Are Falling

As a result of news that Binance, the world's leading crypto exchange by far, is being sued by U.S. regulators, trading in BitcoinBTCUSD -0.49% and other cryptocurrencies fell Tuesday evening. This is not the only reason for the drops, however, as sentiment among digital asset traders turned more cautious.

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A recent price drop of 4% has occurred in the Bitcoin price in the past 24 hours, to $26,800. This is the lowest consistent price for the largest cryptocurrency in almost two weeks, since its most recent rally soared to around $28,500, the highest price seen since June of last year, when its price began to increase. Despite this recent slip, Bitcoin has been on a bullish streak of almost 2 years, with prices climbing from $16,500 at the start of the year, amid a rally that is generating talk of a new bull market.

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CFTC released a surprise lawsuit against Binance earlier this week, causing the stock to plummet. Analyst Alex Kuptsikevich said he would like investors to rethink whether they should invest in crypto exchanges. If banks are a risk, crypto exchanges are even more of one.

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Binance and its co-founder and CEO, Changpeng Zhao, were sued on Tuesday by the Commodity Futures Trading Commission for allegedly failing to comply with rules requiring that futures and other derivatives are traded on platforms that are regulated.

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In addition to powering some of the most liquid and influential Bitcoin futures markets in the world, Binance is also one of the most important entities in the digital asset landscape, so this latest setback by U.S. regulators represents a strike against global crypto trading activity.

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It is possible, however, that this is not the only factor that will push prices down in the short term. On Monday, MicroStrategy, a company headed by high-profile Bitcoin bull Michael Saylor, announced that it had purchased another tranche of Bitcoins for approximately $150 million. The company has been backed by a high-profile Bitcoin bull who also owns significant amounts of digital assets.

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There is a tendency for the market to react negatively following announcements of MicroStrategy acquisitions, with Bitcoin averaged -2.2% on the day following announcements. According to analysts at the digital asset market research group K33 Research, the average 7-day return is more balanced at -0.2%."

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It is more than enough for investors to be occupied by news about Binance and MicroStrategy, but crypto traders should pay attention to the stock market as well.

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Despite the shifting outlook around interest rates, Bitcoin is still subject to macroeconomic forces and movements in the Dow Jones Industrial Average and S&P 500, since higher rates dampen the demand for risky assets, thereby making the cryptocurrency extremely sensitive to macroeconomic forces. It is likely that traders will not be able to access a major macroeconomic catalyst until Friday, but Tuesday is slated to see the release of economic data relating to trade, inventories, and consumer confidence, as well as a statement from a representative of the Federal Reserve.

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Based on market technicals, however, Bitcoin prices appear to have shifted in the immediate term following the dynamics that drove the price up to its recent peak near $28,500.

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The Bitcoin price has confirmed that it has surpassed former resistance around $25,200, which indicates a base is in place in the intermediate term. As a result, we now have a neutral long-term bias. The former resistance level near $25,200 has now become initial support for Bitcoin, according to Katie Stockton, managing partner of Fairlead Strategies.

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Additionally, EtherETHUSD +1.95%, the second-largest crypto, lost 2% to $1,730, falling below Bitcoin. Other smaller cryptocurrencies or altcoins, such as CardanoADAUSD +4.39%, did not do much, while Polygon slipped by 3%. The Binance exchange's native token BNB fell by 6%. DogecoinDOGEUSD –0.14% and Shiba InuSHIBUSD –0.10% both shed 2% of their value during the day.