Bitcoin (BTC) Off 5%, Cryptocurrencies In The Red

Right now, the most important underpinning facing cryptocurrencies is the outcome of the SEC vs Ripple court case.

Shain Vernier•Tuesday, January 26, 2021•2 min read

Will cryptocurrencies totally collapse in the coming weeks?

Following a strong open to 2021, it has been a challenging few weeks for cryptocurrencies. The past 24-hours have been no different as a majority of the cryptosphere has pulled back upwards of 5%. As we roll into the late-Wall Street session, Bitcoin BTC (-5.04%), Ethereum ETH (-5.69%), Ripple XRP (-2.92%), and Litecoin LTC (-5.90%) are all in the red.

When it comes to trading cryptos, rumor and regulation are the two premier market drivers. Over the past week, these issues have stimulated bearish sentiment throughout the asset class:

Ripple Litigation: Fallout from last December’s lawsuit regarding the U.S. Securities and Exchange Commission (SEC) on Ripple persists. The case is due to hit courts in the near future and it will be a precedent-setter. Basically, the SEC is trying to establish cryptocurrencies as securities; a huge step in regulating the entire cryptosphere. Since the litigation began, XRP is off more than 16%.

Institutional Participation: Reports are hitting newswires that America’s most prominent universities are acquiring cryptos. According to anonymous sources, Harvard, Yale, Brown, and the University of Michigan are buying cryptocurrencies directly from the U.S. Coinbase exchange. This is an interesting story as it illustrates that cryptos are continuing their march into the financial mainstream.

It’s still early, but it feels like 2021 is going to be a big year for cryptocurrencies ― one way or the other. If the SEC labels XRP a security, then more regulation is likely for the entire asset class. This will be a key story to watch moving forward.

Bitcoin Pulls Back, Bullish Trend Intact

The chart below is a look at January Bitcoin futures as of Monday’s close. BTC remains in bullish territory, holding just above daily downside support.

Overview: The key number for January Bitcoin futures is the 38% Fibonacci retracement at 32,787. If we see a daily close below this level, a further pullback may develop ahead of Friday’s closing bell.

Right now, the important underpinning for cryptocurrencies is the outcome of the SEC vs Ripple litigation. If XRP is deemed a security, get ready for major changes to sweep the cryptosphere as 2021 unfolds.

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ABOUT THE AUTHOR See More

Shain Vernier

US Analyst

Shain Vernier has spent over 7 years in the market as a professional futures, options and forex trader. He holds a B.Sc. in Business Finance from the University of Montana. Shain's career includes stretches with several proprietary trading firms in addition to actively managing his own accounts. Before joining FX Leaders, he worked as a market analyst and financial writer.