The Ukraine-Russia battle shows no signs of ending. This has resulted in sanctions and regulations coming into force, especially regarding digital currencies. As the regulatory pressure continues, limitations are being placed on upside breakouts. Nonetheless, experts believe that there will eventually be a crypto asset’s market rally.
An upside breakout refers to a digital asset’s price breaking out. This pattern comes into display in the trading range market via horizontal boundary lines moving across the lows and highs. In simpler language, the price may reveal a sharp upward trend over the coming days, or even weeks. In other words, there is all possibility of a bullish trend coming into force. After all, the trading range is long and narrow, or rather, above the lower boundary.
The Scenario in 2022
December 2022 witnessed a sharp plunge in market capitalization. It amounted to $840 billion, indicating a drop of 1.5%. Yet, the cryptocurrency world, which had been ascending in November 2022, did not suffer/break too much. Nevertheless, the overall scenario has been bearish since then. The losses touched a whopping 64% by the end of 2022.
The main culprit for the 1.5% plunge in total market capitalization was Ether (Ethereum). It had a downside trading of 2.5%. However, Ether was not the sole victim of the bearish trend. Other altcoins had significantly suffered too. At least ten coins in the list outlining the top 80 altcoins had incurred a price plunge of 8%.
Trust Wallet (TWT) displayed a gain of 18.6% in November 2022. A correction of 10.1% came into being after the company opened up its staking program, permitting early access. 1INCH unlocked 15% of its supply in December 2022. Later, the company incurred a price drop of 15.2%.
The Current Scenario
Investors, new and old, may peruse details about the performances of various cryptocurrencies in 2022 on Bitcoin smart. It is a popular trading and investment platform. Apart from this, they may also go through reports published in December 2022. It is because the trends at that time have carried the impact to 2023 too. For example, DeFi had come under the scrutiny of the Financial Crimes Enforcement Network (FinCEN). DeFi had the potential to eliminate/reduce the operations of financial intermediaries. FinCEN believed that it would harm efforts to reduce terrorist financing and money laundering.
Financial regulators in Australia have been actively perusing methods that would enable the incorporation of payments via Stablecoins into the regulatory framework. The Reserve Bank of Australia even published a report on Stablecoins on December 8, 2022. The report outlined the risks of disturbances to the operations of funding markets. The risks included bank liquidity and bank exposure.
Hong Kong is also keen to regulate cryptocurrencies. Its Legislative Council decided that providers of services in the virtual currencies arena would have to adhere to a new licensing regime. The new regulation will come into effect from June 2023. Digital currency exchanges will have to adhere to similar legislation catering to traditional financial institutions. There will be stricter laws in place regarding money laundering. Measures for protecting the wealth of investors should also be in place. Only then, will service providers dealing with digital assets, gain licenses to operate.
What Traders Should Do
Lawmakers are discussing the impact of the lack of regulations on financial institutions. They are also concerned about investors’ not receiving sufficient protection from cybercriminals and adverse events occurring in the crypto arena.
On the part of traders, they should analyze the scenario in the Options markets. This way, they will be able to understand if arbitrage desks and whales have better more on bearish strategies or bullish ones. They may also investigate where activity is greater – in the sell/put options, or buy/call options. Generally, the former proves useful for bearish markets, while the latter is suitable for bullish ones.
Then again, traders should have faith that things will improve. This faith was in evidence, as derivatives metrics show. They have been demanding balanced leverage via the usage of Futures Contracts. Even the BTC Options risk assessment metric has been on the positive side. The drop in Bitcoin’s pricing did not seem to have affected this aspect. Thus, the ascending channel should be on display, soon.