Consequences for Bitcoin after CFTC’s crackdown on BitMEX

October 4, 2020 Editor Bitcoin 0

  • BitMEX experienced a high volume of Bitcoin withdrawals after the CFTC crackdown.
  • Experts predict bullish implications following a new strategy of the U.S. federal entities.

The charges filed by the Commodity Futures Trading Commission (CFTC) and the U.S. Department of Justice against BitMEX could be the beginning of a broader strategy targeting the crypto market. Federal entities have accused Arthur Hayes, the exchange’s CEO, Ben Delo and Samuel Reed of operating an unregistered futures trading platform. However, despite the news being negative in the first place, the implications of the accusations and the new strategy of the U.S. federal entities could be bullish for Bitcoin.

In contrast, for the crypto exchange, the outlook appears to be bleak. Data from the analysis firm Glassnode indicates that BitMEX lost more than 23,200 BTC in withdrawals less than 24 hours after the accusations were made public. In total, more than 40,000 BTC have been withdrawn from the exchange. This represents more than 20% of the Bitcoin deposited on BitMEX, which Glassnode estimates holds nearly 1% of the circulating BTC supply.

Bitcoin on the verge of mass adoption?

In the crypto community, the actions against BitMEX and its executives have made a big impression. Analyst Willy Woo said the accusations will force exchanges to “clean up their practices”. In that sense, he expects the health of the market to improve and will evidenced by less volatility, more trading volume in the spot market, and more income from institutional investors.

The analyst said that Bitcoin’s fundamentals indicate that there are more investors now than when Bitcoin reached its all-time high in December 2017. Furthermore, he stated that activity in the derivatives market has “kept the price down”. Therefore, he predicts that the CFTC actions against unregulated exchanges will cause BTC price to “pop”.

Woo believes that Bitcoin is in a “the herd is coming” moment. In a statement, CFTC Chairman Heath Tarbert has signaled a possible approval of an exchange-traded fund (ETF). Therefore, the analyst expects that similar actions against other entities such as BitMEX will continue as a “necessary step” before a Bitcoin ETF approval.

As reported by CNF, the president of the Securities and Exchange Commission (SEC), Jay Clayton, said he is open to the possibility of issuing a tokenized ETF. In an apparent change in the entity’s stance, Clayton said he was willing to “facilitate” the creation of the tokenized ETF if he receives an “efficient” proposal from the crypto community. Clayton’s statements and those of the CFTC chairman are considered bullish and a strong argument in favor of Woo’s predictions.

On the other hand, Bitcoin investor and bull Mike Novogratz has wished the BitMEX CEO well in the process that has been initiated against him and stated that he is “innocent until proven guilty”. About the adoption of Bitcoin, the investor said in a previous publication that more institutional interest and the growth in Ethereum’s DeFi indicate that “the herd is coming”. Novogratz advised investors to buy the dip.

Bitcoin’s price has seen little impact due to recent events. Although the price of Bitcoin and the major cryptocurrencies dropped shortly after the news became public, at the time of publication, the market is already showing a slight recovery. BTC is trading for a price of $10,570 and shows an uptrend of 0.74% in the last 24 hours. Otherwise, the days of high volatility driven by unexpected events seem to have been left behind, as Bitcoin is in its longest period above $10,000.