Bitcoin hits $21,700 low as the SEC puts a halt to the crypto rally

The whole of the cryptocurrency market entered correction territory on Thursday after a closed-door meeting at the Securities and Exchange Commission (SEC) resulted in the determination that the cryptocurrency exchange Kraken violated the law with its on-chain staking service, which the regulator determined to be an offering of unregistered securities. Applying this decision to all U.S.-based exchanges is likely to result in billions of dollars worth of damages, and it is a clear signal that the government is adopting a heavy-handed approach to reigning in the freewheeling asset class. Data provided by TradingView shows that the price of Bitcoin (BTC) plunged below support at $22,500 following the announcement from the SEC, hitting a daily low of $21,700 in the late afternoon and looking primed to experience further losses. Evidence that BTC was on a path lower prior to the days’ events was present in the Bitcoin futures data early on Thursday, which Kitco senior technical analyst Jim Wyckoff said was “a bit weaker and hit a three-week low in early U.S. trading.” As a result of the ongoing struggle to generate additional momentum following Bitcoin’s best January since 2013, “The price uptrend on the daily bar chart has stalled out and the bulls are fading,” Wyckoff warned. “The bulls need to show fresh power soon to revive the price uptrend,” he concluded. SEC takes the momentum from the market Additional insight into the current state of the market was provided by David Lifchitz, managing partner and chief investment officer at ExoAlpha, who noted in a conversation with Kitco Crypto that after the rally witnessed in early January, “the move stalled and sitting just below the upper resistance at $25,000-ish, waiting for some direction.” Lifchitz suggested that direction emerged today, “when around 2 pm EST, Kraken announced that following its SEC investigation it has suspended its staking offering and settled with the SEC for $30 million, while Gary Gensler (SEC Chairman) stated that ‘Staking-as-a-Service providers must register and provide full, fair and truthful disclosure and investor protection.’” The immediate question that arose for Lifchitz following this announcement was, “is Coinbase next? And if so, will all staking be forbidden in the U.S.?” According to Lifchitz, the ramifications of this development on the crypto market “could be massive” due to the large number of protocols that rely on staking, including Ethereum – which changed its validation mechanism from Proof-of-Work to Proof-of-Stake a few months ago. “As traders ‘shoot first and ask questions later,’ this explains the sudden selloff of this bubbling market looking for a pin,” Lifchitz said. “The first logical stop is at $21k for Bitcoin, but should it break down, it might go back to $17k regorging its January gains,” he warned. How the market responds in the days ahead will likely depend on any further actions taken by the SEC and whether or not the Federal Reserve adopts a dovish or hawkish stance moving forward, he said. “If Bitcoin can hold $21,000, we should be fine in the short term, otherwise buckle up!” Lifchitz concluded. Altcoins plunge into the red The rally witnessed across the altcoin market in recent weeks came to a screeching halt in trading on Thursday and reversed course as the SEC’s crackdown was announced. Daily cryptocurrency market performance. Source: Coin360 While the vast majority of tokens plunged well into negative territory, there were a few that managed to overcome the negativity to post double-digit gains, including a 24.55% increase for Rocket Pool (RPL), a 19.47% gain for ssv.network (SSV), and an 18.23% increase for Astar (ASTR). The overall cryptocurrency market cap now stands at $1.03 trillion, and Bitcoin’s dominance rate is 41.3%.