A Broad Selloff in Cryptos: Don't Blame the Kraken

At first glance, the SEC drama caused the Feb. 9 crypto crash. At second glance, the SEC didn't lead the selloff, it followed it.

by Nico Isaac
Updated: February 13, 2023

For those of us kids of the 1980s, there's no forgetting the fantasy sci-fi movie "Clash of the Titans." The scene where god of gods Zeus orders Poseidon to "release the Kraken," an ancient homicidal sea monster, on his rival, holds up as one of the most iconic cinematic moments of all time.

Well, according to mainstream financial "cinema," on February 9, the Securities and Exchange Commission released a different kind of Kraken on the world of cryptocurrencies. To wit: That day, the SEC filed charges against the crypto exchange giant Kraken for failing to register one its offerings.

In turn, Kraken was forced to shut down its crypto-staking service platform for U.S. customers and pay a $30 million fine to settle the SEC's charges.

And as these Feb. 10 news items report, much like the release of the mammoth sea beast upon Argos, the release of the Kraken crackdown caused cryptos across the board to collapse:

• "Bitcoin Slumps in Broad Sell off Amid SEC Charges Against Kraken" (Yahoo Finance)
• "Bitcoin Drops Below $22K as Kraken Agreement to Close US Crypto Staking Operations Spooks Investors" (CoinDesk)
• "Bitcoin Tumbles as Regulatory Storm Clouds Gather Around Crypto" (Barron's)

It's easy for analysts to point their "fundamental" finger for the broad crypto selloff at the $30 million SEC fine against one of the world's largest crypto exchanges. But news of the Kraken charges went viral on February 9. Yet, the downtrend in cryptos began more than a week earlier.

That's when our Crypto Pro Service Elliott wave analyst Tony Carrion began focusing his attention on crypto's downside. On February 3, Carrion recorded a video update for several key players, including Bitcoin and Cardano, alerting subscribers to potential selloffs. For Bitcoin, the make-or-break level for a bearish turn was made clear:

"A really critical level here at 22,760.23. If for some reason that level was violated, we might consider prices peaked at the 24,255 high that we saw the other day."

"Watching for a pullback to complete, while the price action does not exceed the end of the wave 4 triangle at 22,760."

And for Cardano, the focus was uncompromisingly to the downside:

"As we get some retracement of the advance, .3559 would represent the 50% retracement of the January move up."

And here's what followed: Bitcoin turned down, falling below the critical bullish support of 22,760 on Feb. 6. That day, Crypto Pro Service confirmed that price action had forced the bearish wave count into the primary position and set the stage for a sharp and powerful decline.

"The minimum expectation would be for a 3-wave correction to unfold that will satisfy the internal requirements for the decline with a preliminary target in the 20,000s range."

Cardano also fell in kind, meeting its .3559 target on Feb. 10.

On February 7, Crypto Pro Service turned its attention to Litecoin, and warned a similar selloff was in store:

"Focusing on Litecoin and the 68% rally that has unfolded from the low on December 19 which peaked recently at 102.53. We're looking here for a 3-wave correction that could see the price ultimately getting down into the $85-86 range."

And from there, Litecoin followed in its crypto peers' down tracks, touching 90 on Feb. 9 before pausing.

The timeline for the Kraken-caused-crypto-crash is problematic. The February 3, 6 and 7 Crypto Pro Service videos warning of downturns occurred before the Feb. 9 SEC charges against the crypto exchange.

Elliott wave analysis is a living system. And, since their original posts, some of the Elliott wave counts presented here have been adjusted to meet price action. However, the overall trend remains unchanged.

As for where these cryptos will go next, the current Crypto Pro Service presents intraday, daily and weekly analysis of Bitcoin, Cardano, Litecoin -- not to mention Ripple, Solano, Polkadot and more! See below for details on how to get instant access to the complete Crypto Pro Service catalog.