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FALLOUT FROM FTX CONTINUES TO AFFECT CRYPTO MARKETS

The Crypto market as a whole continues to face significant headwinds as the fallout from FTX continues to spread. Crypto exchanges have been struggling to convince customers their assets are safe with a recent data release from CryptoQuant revealing reserves of Bitcoin, Ethereum and Stablecoins have fallen sharply since the FTX scandal. Exchange platforms from Binance to Crypto.com have made an effort by providing full or partial disclosures of their assets as users continue pulling funds.

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The biggest impact of the spread thus far has been experienced by the Gemini Trust Co. who announced a suspension on redemptions at its lending unit while Blockfi Inc. is on the verge of filing for bankruptcy. Genesis have warned investors of a potential bankruptcy filing if it is unable to raise $1 billion dollars in fresh capital to support its lending unit.

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These developments have kept Crypto markets on the back foot struggling to post any significant gains. In a week that saw risk sentiment improve for stocks and the US Dollar retreat following dovish FOMC minutes, both Bitcoin and Ethereum were unable to capitalize as trading volumes continue to decline as well. However, both BTC/USD and ETH/USD remain on course for marginal gains this week heading into the weekend.

ETH/USD TECHNICAL OUTLOOK

ETH/USD Weekly Chart

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Source: TradingView, prepared by Zain Vawda

From a technical perspective, Ethereum (ETH/USD) on the weekly timeframe is trading within a bearish pennant pattern hinting at a downside breakout. There remains the possibility for a push to the upside to retest the descending trendline once more before a downside breakout occurs. However, the 200-day MA lies just above current price around the $1338 area which could halt any attempted push to the upside. A breakout of the pennant pattern to the downside could see a retest of the YTD low print from June 13 that rests around the $864 area.

BTC/USD TECHNICAL OUTLOOK

BTC/USD Weekly Chart

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Source: TradingView, prepared by Zain Vawda

From a technical perspective, BTC/USD has retested the long-trendline from November 2021 and trades just above it. The pair has already seen one false breakout of this trendline in the last week of October before declining back below the trendline. This week has seen the pair post a new YTD low around the $15479 area bouncing of the bottom of a falling wedge pattern. The falling wedge pattern coupled with a break of the long-term (2021) descending trendline hints at a potential bullish move heading into the new week. A move higher faces significant hurdles with the $18000 level (September and October lows) set to provide resistance while a break higher will need to clear the 20-day MA before a break of the falling wedge pattern comes into play. The break of the falling wedge pattern should it occur could take a few weeks to play out and maybe something to keep an eye on.

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Alternatively, a break below the falling wedge pattern would first need to clear the psychological $15000 level which could open up a test of the October 2020 resistance turned support area around $12300.

BTC/USD Daily Chart

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Source: TradingView, prepared by Zain Vawda

Following a bullish engulfing candle close on Tuesday, BTC/USD followed it up with another bullish day before closing as a doji candlestick on Thursday. The doji candlestick close once again highlights the downside pressures on crypto markets at present as this was a day after the dovish FOMC minutes which saw the US dollar index decline.

A daily candle close above the $16800 level will be the first sign of a bullish shift in price action as it would be a higher high for the pair and may see BTC/USD make a run for the $18000 resistance area. The 20-day MA provides short-term resistance resting around the $17000 area at present which could see the rally stall giving the pair an opportunity for a new lower high to form before its next leg higher.

— Written by Zain Vawda for DailyFX.com

Contact and follow Zain on Twitter: @zvawda





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