- US government is preparing further restrictions on the cryptocurrency market
- Concerns over China and caution ahead of FED meeting weighed on sentiment
- Ripple is testing major support zone
Cryptocurrencies dropped overnight as risk moods deteriorated ahead of the FOMC meeting later in the week and concerns regarding possible default of the Chinese real estate giant Evergrande and the eventual contagion to other financial markets outside China. Also news that the US government is getting ready to introduce new cryptocurrency market regulations also weighed on sentiment. Bitcoin's market dominance decreased to 42.7%. The capitalization of all digital assets in circulation fell to 1.96 trillion, while an average daily trading volume is registered at $106.0 billion.
Further regulation is coming soon
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Open account Try demo Download mobile app Download mobile appBitcoin slumped at the beginning of a new week ahead of the Federal Reserve meeting amid concerns over possible bankruptcy of the second largest property developer in China Evergrande. Collapse of such a high-profile company would likely lead to significant problems in the Chinese banking sector and may trigger more defaults in the Chinese real estate sector. After recent hawkish comments from several policymakers, Bitcoin investors await the outcome of the Federal Reserve policy meeting on Wednesday. Cryptocurrencies and other risky assets could face selling pressure if FED will confirm that tapering will begin in October or November. The third factor that negatively affects market sentiment is speculation that the US government may declare stablecoins as a risk to the financial system. Stablecoins are a type of cryptocurrency linked to an asset like the US dollar that doesn’t change much in value. The first stablecoin, created in 2014, was Tether, which many other stablecoins are modeled after. Users receive one token for every dollar they deposit. However, according to the New York Times, US authorities are considering stablecoins as “systemically risky” and that they should be under regulatory control. As a result cryptocurrencies may be treated as securities, money market mutual funds or as banks. The article suggested that the rush to bring stablecoins under control might be “the most important conversation in Washington financial circles this year” and may be a sign that further regulation is coming soon. These issues, coupled with the quarterly bitcoin options expiry due this Friday, may keep the cryptocurrency market volatile this week.
Bitcoin price fell sharply during today's session, broke below 50 SMA (green line) and 200 SMA (red line) and is currently testing major support at $44,000 which coincides with 38.2% Fibonacci retracement of the last upward wave and previous price reactions. Should break lower occur, then downward move may accelerate towards next support at $41,183. Source: xStation5
Ripple under selling pressure
Ripple has been trading in a downward move recently and sell-off accelerated during today's session. Also on-chain metrics indicate deterioration of market sentiment.
The number of daily active addresses jumped above 31,300 at the beginning of September, however due to falling prices this number declined by more than 8% to approximately 28,700 on Friday. This illustrates the low interest in Ripple among investors who are likely to sell their holdings, which in turn deepens the downward movement.
Number of daily active addresses fell sharply in the second part of September. Source: Santiment
Ripple managed to break above $1.40 at the beginning of the month, however buyers failed to uphold momentum and price pulled back sharply. Currently price is testing major support at $0.92 which coincides with 200 SMA (red line) and 50% Fibonacci retracement of the upward wave which started in the second part of July. Should a break lower occur, then downward correction may deepen. Next target for sellers is located at $0.8190. On the other hand, if buyers will manage to halt declines here, then another upward impulse towards $1.03 may be launched. Source: xStation5
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