Bitcoin drops to $46K, altcoins sell off as report claims Binance is under investigation

News that Binance could be under investigation by the U.S. Justice Department and IRS triggered a marketwide sell-off that saw Bitcoin’s price drop to $46,000.

Within the last hour, Bitcoin’s (BTC) price dropped by more than 3%, extending the decline that started on May 12 and saw the digital asset drop as low as $46,000 on some exchanges.

Initially, it was Tesla’s May 12 announcement that it would stop accepting Bitcoin as payment over environmental concerns, along with technical weakness and a nearly complete head-and-shoulders technical pattern, that pushed BTC’s price down to $46,000.

Daily cryptocurrency market performance. Source: Coin360

May 13’s bearish catalyst appears to be a Bloomberg Tax report claiming that the United States Justice Department and the Internal Revenue Service are investigating Binance Holdings Ltd. for alleged “illicit activity.”

While the investigation is unconfirmed at this moment, as the news broke, Bitcoin’s price quickly dropped by more than $3,000 and currently trades at $47,300.

BTC/USDT 4-hour chart. Source: TradingView

From the viewpoint of technical analysis, the bearish head-and-shoulders pattern is now confirmed, and barring a bounce off the 61.8% Fibonacci retracement level at $42,600, traders may look for BTC’s price to restest the $40,000 level as support. Below this, there is the 200-day moving average at $39,000, and in a worst-case scenario, $35,000 is the target of the head-and-shoulders pattern.

Bitcoin’s price may be revisiting multimonth lows, but a quick glance through Crypto Twitter shows that most traders view the current pullback as a “buy the dip” opportunity, including Micheal Saylor, who on May 13 tweeted that MicroStrategy bought another 271 BTC at an average price of $55,387.

MicroStrategy has purchased an additional 271 bitcoins for $15.0 million in cash at an average price of ~$55,387 per #bitcoin. As of 5/13/2021, we #hodl ~91,850 bitcoins acquired for ~$2.241 billion at an average price of ~24,403 per bitcoin. $MSTR

— Michael Saylor (@michael_saylor) May 13, 2021

This is not the first time Binance has been accused of unlawful activity by U.S. authorities and regulators. On March 12, Cointelegraph reported that Binance was under investigation for its loose Know Your Customer and Anti-Money Laundering procedures, an accusation that Binance CEO Changpeng Zhao said had “no teeth”

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