Bitcoin (BTC) plummeted below $27,000 after the US Commodity Futures Trading Commission (CFTC) filed a lawsuit against Binance and its founder Changpeng Zhao over allegations that the exchange knowingly offered unregistered crypto derivatives products in the US, which constitutes a violation of federal law.
The BTC/USD trading pair on the Coinbase exchange fell to $26,525, its lowest level since March 17, TradingView data showed. The largest cryptocurrency by market cap recently traded at $26,978, down 3.1% over the past 24 hours.
“From what I can see, the crypto community is putting this message on the Here We Go Again pile,” Julius de Kempenaer, senior technical analyst at StockCharts.com, told CoinDesk.
Kempenaer said the Binance-CFTC lawsuit “very likely” lowered the price of BTC. However, he added that the “impact of the lawsuit is unclear” even as it offers the latest example of increased regulatory scrutiny, a trend the industry will continue to monitor closely. He said Bitcoin could fall to its previous breakout level near $25,000.
“As long as this level holds, the break with a long-term bottom formation is still in play,” he said. But he added that “taking out the strong overhead resistance area between $29,000 and $32,000 will open the way for a much stronger move higher.”
Monday’s Binance CFTC news caught traders betting on price gains off guard. According to data from Coinglass, they liquidated around $39 million worth of BTC long positions.
In the lawsuit against Binance, filed in US District Court in Illinois, the CFTC named several cryptos, including BTC, Ether (ETH), Litecoin (LTC), Tether (USDT), and Binance USD (BUSD). US Securities and Exchange Commission (SEC) Chairman Gary Gensler has previously implied that proof-of-stake tokens are securities.
ETH, the second-largest cryptocurrency, fell below $1,700 before recovering to $1,703 recently, still down 3.6% from the same time on Sunday. BNB, the native token of Binance-initiated blockchain network BNB Chain, is down over 5% to around $310 from around $327 a day ago. Litecoin (LTC) is down nearly 4.8%.
Regulatory ambiguity is a “worrying” factor in how markets are moving, particularly the specific allegations contained in the CFTC lawsuit, Riyad Carey, a research analyst at crypto data firm Kaiko, told CoinDesk.
“Binance is by far the largest crypto exchange in the world and as such has an outsized impact on the markets,” Carey said, although he added that given the importance of this regulatory news, the market decline wasn’t “too severe.”
Stock markets were mixed on Monday afternoon as investors weighed the announcement that regional lender First Citizens BancShares would buy most of Silicon Valley Bank’s business. The S&P 500 and Dow Jones Industrial Average (DJIA) were up 0.4% and 0.8%, respectively. The tech-heavy Nasdaq lost 0.1%.