Cryptocurrencies came under selling pressure as reports emerged that that Bitfinex and Tether were subpoenaed by the U.S. Commodity Futures Trading Commission (CFTC) last week. Tether is a so called stablecoin, the idea behind them is to peg a cryptocurrency coin to something like the U.S. dollar. According to the Tether website, “Tether Platform currencies are 100% backed by actual fiat currency assets in our reserve account”. However, it had been observed in recent weeks that the amount of Tether has grown rapidly to over $2.2bn. Tether also parted company with their auditor, raising further suspicions that the company is creating assets out of thin air. Tether is connected to Bitfinex, which is one of the world’s biggest crypto exchanges. Traders owing Tether or having assets on Bitfinex may want to consider taking evasive action.
Additionally, sentiment was further dented by the news that Facebook is planning to ban all advertisements on its platform promoting digital currencies or initial coin offerings (ICOs).
In the 4-hourly time frame, BTCUSD has broken down from a wedge and is again testing the psychologically important 10,000 level. A break would lead to a move to test the 61.8% Fibonacci retracement at 8,100. A reversal above 11,500 would be needed to change the bearish outlook and a break of horizontal resistance and confluence of Fibonacci at around 13,000 may be needed for a full recovery to take hold.
Ripple has already hit the 78.6% Fibonacci target of 0.89, where buyers had emerged resulting in a recovery. In the 4-hourly log scale chart, XRP found resistance at the 50MA and 200MA and failed to follow through on the bullish move. The cryptocurrency has now broken a wedge to the downside and looks set to test the lows at 0.89 once again. A break of this level could see a return to the horizontal resistance at 0.42. On the flip-side, a reversal above of 1.39 would help put the bulls back in control.