Calls for regulation add to bitcoin and crypto headwinds
In an interview on Dutch television, Christine Lagarde lambasted cryptocurrencies, maintaining that they "should be regulated." Moreover, the ECB president pulled no punches saying that her "humble assessment is that it is worth nothing, it is based on nothing, there is no underlying asset to act as an anchor of safety." She is concerned that people don't fully understand the risks associated with digital currencies and "will lose it all."
Lagarde's criticism is not isolated. For example, US Treasury Secretary Janet Yellen also called for regulating the cryptocurrency market after Terra's (USDT) capitulation.
Last week, our article suggested that bitcoin had completed a sizeable top pattern. The measured move from the pattern gives a significant decline to around the 16,000 level. This target is over 45% lower than the current price. Whilst measured moves can never be guaranteed due to the dynamic nature of markets, the ongoing calls for crypto market regulation are likely to contribute here.
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To this end, keep an eye on the weekly stochastic. If it dips below 20 and holds this level (green rectangle), bitcoin and the cryptocurrency market will be under severe pressure. This bearishness, in turn, will make the target more conceivable.
Russell Shor
Senior Market Specialist
Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.
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