Summary

• Crypto prices fell due to a US Justice Department enforcement action notice.
• The action was a money laundering charge against Bitzlato.
• $110M worth of futures positions were liquidated representing 76% of all trades.

A notice on the U.S. Justice Department's website regarding a new cryptocurrency enforcement action caused a steep sell-off in the market, leading to a dip in the prices of bitcoin and ether below recent support levels. The announcement turned out to be a money laundering charge against Bitzlato, a lesser-known crypto exchange accused of illegally conducting $700 million in direct and indirect transfers over the last several years. This caused a significant amount of traders betting on the market's growth to liquidate their positions.

CoinGlass data shows that over $110 million worth of futures positions betting on the rise of bitcoin and ether were liquidated in the past 24 hours, representing over 76% of all futures trades. Dogecoin (DOGE) futures also saw $9 million in liquidations, while solana (SOL) and aptos (APT) futures took on $8 million in losses each. Out of the total $224 million in liquidations, crypto exchange OKX saw the majority of losses at $109 million, followed by Binance at $90 million.

The time between the initial announcement and the actual news about Bitzlato ended up being a hotbed for doomsayers, with such sentiment being enough to trigger the steep fall in prices. Bitcoin quickly tumbled some $1,000 to under $20,600 after touching a four-month high of about $21,550. Ether fell to $1,500 from over $1,600, with major tokens like XRP and cardano (ADA) following the brisk sliding. Despite the liquidations, bitcoin and ether recovered slightly on Thursday, with prices remaining steady in Asian trading hours.

Some analysts, however, were expecting an imminent pullback in the market regardless of the news-driven trading. Markets analysts at crypto exchange Bitfinex said in a note earlier this week, "The entire recent rally has been built on the backbone of continuous market shorts keeping funding low and prices being pushed up by forced liquidations and running stops. A pullback might be expected with a cautious approach from bulls,” they pointed to the “limited traders in the market, which is evident from the market depth remaining the same week-on-week.”

In conclusion, the announcement of a major international cryptocurrency enforcement action by the U.S. Justice Department led to a steep sell-off in the market, causing a significant amount of traders to liquidate their positions and leading to a dip in the prices of bitcoin and ether below recent support levels. Despite this, prices have slightly recovered and some analysts have predicted a pullback in the market regardless of the news-driven trading.