(Kitco News) – It was a volatile day of trading in the crypto market as prices climbed higher during the morning trading session, only to give back those gains and slide into the red in the afternoon after authorities in the U.S. announced charges against KuCoin, a top-ten cryptocurrency exchange that has been in operation since 2017. 

This is the latest enforcement action against cryptocurrency exchanges following a year that saw some of the world’s largest exchanges – including Binance, Coinbase and Kraken – fall under increased scrutiny from U.S. regulators looking to rein in the wild-west nature of the crypto market. 

Stocks traded higher for most of the day as traders looked to push for a positive end to a record-breaking quarter that saw the S&P 500, Dow, and Nasdaq hit new highs, but a sharp downturn near the market close foiled those plans as the major indices fell into the red. 

At the closing bell, the S&P, Dow, and Nasdaq recorded losses, down 0.28%, 0.08%, and 0.42%, respectively. 

Data provided by TradingView shows that after starting the day near $69,900, Bitcoin’s (BTC)  price spiked to a daily high of $71,585, and then proceeded to dump to $69,275 before ultimately returning to $69,770, where it trades at the time of writing. 

BTC/USD Chart by TradingView

The weakness seen in recent days has largely been attributed to a decrease in flows into the spot BTC ETFs, which recorded five straight days of net outflows last week. But that could soon change, as there are reports that Morgan Stanley is preparing to offer access to Bitcoin ETFs within the next two weeks, while Goldman Sachs has reported an uptick in interest from hedge funds. 

Investors in Asia could also soon provide a boost as Hong Kong is reportedly going to allow in-kind creations and redemptions for spot bitcoin ETFs beginning in April. 

Looks like Hong Kong is going to allow in-kind creations and redemptions for spot bitcoin ETFs in 2Q (unlike US which is cash creations only), which could help spark aum and volume in the fast-growing region via new note today from @Rebeccasin_SK https://t.co/IxcdWEFDvC pic.twitter.com/sDsS4nbzGi

— Eric Balchunas (@EricBalchunas) March 26, 2024

Dovish Fed boosts risk assets

While the spot Bitcoin ETFs continue to be the focal point for many market analysts, the Federal Reserve was responsible for the recent resurgence of crypto prices as they have been trending higher since last week’s FOMC meeting, where the central bank kept interest rates steady while maintaining the stance that there will be three rate cuts in 2024. 

“This dovish tone, especially given that the last CPI print was a bit above analyst forecasts, was enough to give some bullish momentum to risk-on assets,” said market analyst Bloodgood. “As for the next FOMC on 1 May, the market is currently pricing in only an 8% chance of a cut, meaning that we’ll probably have to wait at least until summer for rates to start moving down.”

“Meanwhile, there is bullish news for crypto from the institutional side as well, with BlackRock recently filing with the SEC to launch a tokenized asset fund on Ethereum and seeding a wallet for this fund with $100k USDC, with on-chain degens unsurprisingly proceeding to send a vast assortment of memecoins to the wallet,” he said. “That will definitely make for some interesting conversations over at BlackRock, but in any case, what matters in the long run is that the world’s largest asset manager is committed to doing stuff on-chain.”

“Along with spot ETFs, this is the kind of development that will bring the crypto space attention and adoption from sectors that previously wouldn’t even have considered it,” Bloodgood said. 

He noted that Bitcoin’s recent “dip towards $60k was bought with force and pushed the weekly close back above $67k,” and said, “We are in a weird spot right now; slightly above the 2021 ATH, but slightly below the current high.” 

“I remain patient and will wait for more signals which will show me the direction we are headed,” Bloodgood said. “A weekly close above $70k would be a good start, a weekly close above the current high would be extraordinary.”

“Looking at the daily chart we can see that the downtrend was broken after 9 days,” he said. “The $68k level is definitely one to look at in case a retrace happens and bulls will want to see a bounce here. If the bounce doesn’t happen, this will be considered a lower high.”

“The recent sell-off managed to shake out a lot of overleveraged traders, and the fear was even further increased by the fact that we had a whole week of net negative spot BTC ETF flows,” Bloodgood said. “This, however, was driven largely by GBTC outflows – BlackRock’s IBIT, for example, may have slowed down with the inflows, but it didn’t come close to being negative – and the net flows flipped back positive yesterday.”

“Coupled with some overblown bearish regulatory news, namely the Ethereum Foundation getting a voluntary request for information from a state entity (which could turn out to be completely trivial) and the EU implementing some stricter rules on anonymous transactions (which they were going to do anyway), it’s fair to say that a lot of weak hands were shaken out,” he added. 

“This doesn’t necessarily mean that BTC will go up in a straight line, but the important thing is that it doesn’t have to: during the correction, funding rates were reset across the board and a lot of open interest was wiped out on altcoins,” he noted. “In these conditions, BTC deciding to do nothing for a while would create some absolutely amazing opportunities for altcoins.”  

Altcoins hit hard by KuCoin charges

The charges against KuCoin hit the altcoin market hard as the exchange is one of the preferred platforms for trading lower-cap tokens. As a result, roughly two-thirds of the coins in the top 200 recorded losses on Tuesday. 

Daily cryptocurrency market performance. Source: Coin360

Threshold (T) was the biggest gainer, increasing by 21.3%, followed by a 16.5% gain for dogwifhat (WIF), and a 16.2% increase for MANTRA (OM). KuCoin Token (KCS) was the biggest loser, falling 14.2%, while Centrifuge (CFG) fell 11.1%, and Akash Network (AKT) lost 9.9%. 

The overall cryptocurrency market cap now stands at $2.63 trillion, and Bitcoin’s dominance rate is 52.1%.