Why traders are not worried that the KuCoin hack will drop Ethereum price
Analysts say that the unknown hacker behind the KuCoin breach is selling the stolen ERC-20 tokens on Uniswap. Although selling tokens on the Ethereum-based decentralized exchange allows the hacker to obtain Ether (ETH), it doesn’t mean it’s laundered.
All transactions made on the Ethereum blockchain network are traceable using blockchain explorers, meaning even if the tokens are converted to Ether, the stolen amounts would still leave traces. This means exchanges can (and probably will) suspend any exchange address that is associated with the tainted funds.
The 1-day chart of Ether. Source: TradingView.com
Attempting to sell tens of millions of dollars worth of traced funds immediately after a breach is risky. All major exchanges are on alert, and in this specific case, Tether (USDT) froze the funds linked to the KuCoin hack.
As Cointelegraph previously reported, Bitfinex and Tether chief technical officer Paolo Ardoino said Tether froze $33 million worth of USDT but Ardoino emphasized in a follow-up statement that there are stringent guidelines that must be followed to freeze funds. He explained:
“Tether can decide to freeze funds in 2 situations: – law enforcement / regulator request – funds are sent to unrecoverable addresses (completely at tether discretion) This ability does not entitle crypto users to participate to stupid scams or paying less attention.”
With Tether actively tracking the funds and major exchanges, like Binance and Bybit contacted by KuCoin, it has become increasingly difficult to sell the funds. KuCoin CEO Johnny Lyu said:
“We are in contact with many major crypto exchanges such as Huobi, Binance, OKEx, BitMax, and Bybit, as well as blockchain projects, security agencies, and law enforcement to work on this. Some effective measures have been taken, and we will update with more details soon.”
The hacker sold the ERC-20 tokens to obtain ETH, but the transactions and Ethereum addresses can be traced using Etherscan.
Since existing major decentralized exchanges do not have privacy solutions, the ERC-20 tokens would leave traces for exchanges to follow. For this reason, many analysts are not worried that the movement and market sale of Ether tokens will place pressure on Ether price.
According to Ardoino, selling the stolen ERC-20 tokens on a decentralized exchange like Uniswap carries interesting repercussions.
He suggested that in the future, decentralized exchanges implement privacy solutions like confidential transactions to appeal to users. Ardoino said:
“This might have interesting repercussions. While we’re staring at laundering while it happens on a transparent DEX, couple of considerations arise for me: Will liquidity providers be tainted? Privacy is key, probably the next DEX should use confidential transactions.”
Ethereum long-term Price Analysis: 28 September
Ethereum’s long-term outlook seemed bearish, at the time of writing. In fact, the price might drop by 20-30% as this bearish pattern develops on the charts. Interestingly, this might coincide with Bitcoin’s movements as well.
Here, it should be noted, however, that this is all happening on a weekly time frame, and hence, it could be months before Ethereum’s price actually breaks out of the pattern.
The rising wedge is a bearish pattern and has an obvious breakout towards the bottom. However, since the said pattern formed on the weekly time frame, the breakout, should it go to the full extent, will be devastating. Perhaps, this might, as mentioned, coincide with Bitcoin filling the CME gap. Additionally, Bitcoin too formed a similar rising wedge pattern on the daily timeframe.
Although ETH has a long way to go before it breaks out, the implications are bearish nonetheless. At press time, the price seemed to have finished its bout with the bottom of the wedge and was hinting at heading higher. However, it could also re-test the bottom of the wedge again.
After its re-test, if any, the price will be bullish and might surge about 15-20% until it hits $445. Hereon, the price will be heading towards the breakout, with targets at $432, $369, $312, and $288. If the selling pressure continues, ETH might even wick down to $263.
The $312-level coincides with the 20-Week moving average [Yellow], a bounce from here corresponds to a healthy uptick. The opposite, however, would be disastrous as the price rarely dips below the 20 WMA in a bull market.
If the 20 WMA fails, then the last line of defense will be the 50-Week moving average [blue] at $263.
Ultimately, ETH is expected to head 20% higher from the press time price, before dropping ~40% from the peak. The bullish scenario was supported by the Stochastic RSI which hinted at a potential bullish crossover soon.
Likewise, the RSI indicator seemed to be finding support at the 57-level, which will help ETH’s bullish case.
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