The domino effect of the cryptocurrency exchanges

Suddenly the exchange offices in Turkey started to burst, what should investors be careful about. The deep correction in the prices of cryptocurrencies and bitcoin and what the technical analysis shows now.

The situation with cryptocurrency exchanges in Turkey is beginning to take on a domino shape. Now not one, not two, not three, but four are the ones who suspended their work in a few days. The beginning was made with Thodex, whose 27-year-old founder has left the country and the authorities are preparing to request his extradition from Albania, where he seems to have taken refuge.

According to the victims ‘lawyer, the users’ money amounts to almost two billion dollars. However, the CEO of Thodex has denied the allegations of embezzlement and intends to return the money to his customers soon. As justified, the real reason for the cessation of transactions and withdrawals was the investigation of suspicious transactions in 30,000 customer accounts discovered during the quarterly inspection. He also revealed for the first time that his company had been attacked by hackers in April 2018, who snatched $ 6 million worth of cryptocurrencies (at the then prices).

The second Turkish exchange to suspend its operations was Vebitcoin. According to Bloomberg, CEO Ilker Bas and three other employees have been detained. Vebitcoin is the fourth largest exchange in Turkey, with about 10% of Thodex turnover.

Yesterday followed a third, GoldexCoin, smaller in size than the previous two, which suspended part of its Gldx Token trading activities. The company said that duplicate transactions were detected and, therefore, work began to eliminate systemic problems. Sistemkoin was the next, where suddenly its users saw the homepage reporting that it was under maintenance.

Photo by Executium on Unsplash

Circles from the neighboring country report that after Thodex there was a concern and a wave of liquidations from investors, which led to the problems of others. Others suspect that there was a “finger” of the government behind it. Since they cannot directly block citizens’ access to cryptocurrencies, the only way to prevent the Turks from converting the national currency into Bitcoin is to be afraid.

Of course, this can only work for the ignorant. The most informed have ways to deal with the threat. After all, how much more to fear, when in the last 5 years the Turkish pound has lost 99% of its value against Bitcoin. As Menander had written from the 4th century BC. “There is no stronger law than necessity.”

The need for information

We have repeated them thousands of times, let’s say it one more time. Before making any move on cryptocurrencies, at least know the basics. It is not a sufficient excuse that I trusted my cousin who “knows”. Especially in Bitcoin and in the field of cryptocurrencies, there are many peculiarities. It is easy to be fooled by an ignoramus by someone clever who, especially in such periods, shows up with audacity.

You may not have entered the crypto space and not heard the basic rule, “Not your keys, not your coins”. If you do not own the keys to your coins, you are not the real owner of them. It is tragic to think that you are the owner of a small fortune, seeing the value of your cryptocurrencies go up, and suddenly discover that in the end, you have nothing because someone else has abused them.

The causes of the correction and the prospects of crypto

Cryptocurrency exchanges are a major driver of the digital asset market. Most transactions take place there, so it is important to keep track of the changes that take place there. Most importantly, the change in the number of coins coming in and going out. This data provides invaluable information on investor behavior and dispositions.

When currencies are transferred from exchanges to private wallets, it means that the outlook is on long-term holding and vice versa. So we had a significant change in the last 24 hours, as 20,370 Bitcoin was deposited more than what was withdrawn. Such a large incoming quantity had to appear from the big retreat on March 20, 2020.

Photo by Executium on Unsplash

In the short term it is important, but looking at the big picture there is nothing to worry about. The trend of recent months has not changed yet. But what we have to keep in mind is that the dynamics change easily.

As we mentioned a few days ago last weekend was one of the most important days in the history of Bitcoin derivatives markets. More than a million traders were forced to liquidate their position. Such a large number in one day had not existed even on the day of the bi drop in the price of Bitcoin last March when the price fell by about 50%.

When bets on the rise become too much, it becomes profitable to bet on the fall. Of course, the opposite is also true. What is special in this case is that the financing rates of the derivatives were negative. The previous time something like this had happened, a rally had followed.

Another interesting development concerns the continuous accumulation of Bitcoin by miners. This is indicated by the “Miner Net Position Change” index. This indication has two interpretations: miners expect higher prices and therefore appear reluctant to sell their coins. The other is that they have the opportunity not to do so since it is now possible to borrow to cover their operating costs, pledging their Bitcoin. This is a key differentiator between this uptrend and the previous ones.

Tens of thousands of new entities are entering the Bitcoin blockchain every day during this time. Their increase is evident in recent years. But where we really have an explosion in 2021, is in the addresses that contain from 100 to 1,000 Bitcoin (green line). What does this mean; That the large wallets of institutional and listed companies have begun to enter. And we are still at the beginning if we consider that many more have made public their intention to enter.
It seems that Bitcoin had become oversupplied in the short term, which gives a convincing explanation for the decline. Whenever we see it moving above the sea line, the price corrects. Whenever it is down, it shows us that it is a buying opportunity. Now the price is almost on the S2F line.

Photo by Aleksi Räisä on Unsplash

Suppose April finally closes negative, which is the most likely scenario. Is this definitely a bad thing? We had seen something similar in 2017, as we see in the monthly chart. After several months of rising, a red monthly candle followed, close to $ 5,000. If we follow the pattern of 2017, without of course this being a given, it means that we will see a quadrupling of the value of Bitcoin until it reaches the top. How much is X4? Nearly $ 200,000 before the end of the summer, based on this model.

It is healthy for the market to correct. The shorter ones give the opportunity to buy those who are out. All indicators show that Bitcoin is in an overbought phase, it needs a downturn to return to less excessive price levels.

If you think you missed the train because you now find Bitcoin expensive, remember that 2013 was “very expensive”, 2014 “very expensive”, 2015 “very expensive”, 2016 “very expensive”, 2017 very expensive “, in 2018” very expensive “, in 2019” very expensive “, in 2020” very expensive “. Bitcoin is always “very expensive” for those who do not believe.

Think about where the market was a few months ago and where it is now. Anyone who said that reaching $ 50,000 would be considered a drop would be considered untrue. This is probably the biggest gain of the season. To consolidate in everyone’s consciousness that the value of a Bitcoin amounts to tens of thousands of euros or dollars. After all, perhaps the biggest mistake an investor can make at this juncture is that he has not placed even a small percentage of his savings in the crypto market.

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Nil Lenon

Nil Lenon

A software specialist during the day and a side hustler during night. Writing about code, IT products, personal development and career tips.