Cryptocurrencies turn bearish after Bitzlato closure and Genesis rumors

There´s been a 180-degree turn in the cryptocurrency market. After two weeks of uninterrupted rises, Bitcoin (BTC) and Ethereum´S (ETH) bullish streak has come to an end. The world's largest 'crypto' has fallen more than 2% in the last 24 hours and trades below $21,000, while the main 'altcoin' of the market has dropped even more, by 3%, and tries to maintain $1,500.

Cryptocurrencies were having a peaceful Tuesday when, after the opening of Wall Street, the Department of Justice (DoJ) announced a "regulatory action". Shortly afterwards, the US Justice Department announced the paralyzation of the operations of the little known Hong Kong exchange Bitzlato and the arrest of its founder, Russian Anatoly Legkodymov, accused of money laundering and financing.

According to the DoJ, the cryptocurrency exchange offered peer-to-peer services and hosted the digital wallets of criminals who bought and sold illegal products, involving a total of $700 million mobilized in direct and indirect transfers in recent years with Hydra, one of the largest illegal marketplaces on the 'deep web' that was shut down last April in a joint action between the US and Germany. Deputy Attorney General Lisa Monaco stated that this crackdown is the most significant action against a criminal network in the crypto space to date.

All in all, blockchain analytics firm Santiment noted that digital assets have moderated their declines following this news, as "traders expected the DoJ to be preparing something more drastic."

Rumors are also growing of a possible bankruptcy filing by crypto-lender Genesis, a subsidiary of Digital Currency Group, due to its liquidity problems. The company is in a dispute with 'exchange' Gemini due to the Gemini Earn program, which came to an end in January, two months after Genesis froze withdrawals. The Winklevoss brothers, founders of Gemini, accuse Digital Currency Group of owing more than 1.6 billion, 900 million of which would be directly related to the Earn program.

Yesterday, on Wednesday, Digital Currency Group suspended the dividend corresponding to the last quarter of 2022 to "preserve the liquidity" of the company. It should also be recalled that the Securities and Exchange Commission (SEC) accused both platforms of selling securities not registered in the Earn program.

Other experts also pointed out that the sharp losses recorded on Wall Street on Wednesday, driven by worse-than-expected retail sales and December producer prices, may have permeated the crypto space.

Giles Coghlan, highlighted the growing correlation between digital assets and tech stocks, arguing that the Nasdaq rally came "on the assumption that U.S. inflation is retreating and that short-term interest rate market predictions of two Federal Reserve rate cuts this year are correct."

"We can see a similar recovery in the crypto markets,” he told CoinDesk, dismissing any connection between the debt ceiling debate and the crypto rally. “Ultimately, the crypto rally should continue as long as tech stocks stage their recovery. However, as all eyes turn to earnings season, things could change quickly."

Santiment pointed out that the 'rally' being experienced by meme tokens such as Dogecoin (DOGE) or Shiba Inu (SHIB) are "contrary" to the market's good health. "Every time the price of DOGE starts to rise rapidly, there is a crash of the whole market moments later," they asserted. After the sharp rises of the past few days, DOGE and SHIB have fallen 6% and 7%, respectively.

In other market news, Binance coin (BNB) fell by 3% and Cardano (ADA), Polygon (MATIC), Solana (SOL) and Polkadot (DOT) dropped between 3% and 5%.