A short-term momentum could cause a drop to USD 38,000, but the bulls need to defend the support at USD 40,200. The weekly candlestick chart indicates that buyers could have triggered a bullish move in the medium term.
The People’s Bank of China (PBOC) is again putting pressure on the market for Bitcoin and other cryptocurrencies. On this occasion, the monetary authority said that all transactions related to cryptocurrencies are illegal, for which it prohibits them.
The prices of the different crypto assets on the market did not take long to react to the announcement of the PBOC. In the case of Bitcoin, its value fell again, losing around 5.94% in 24 hours after having recovered strongly.
The price of Ether has fallen a bit more, accumulating a loss of 8.94% in 24 hours. Concerning Cardano, it did not suffer that much as it only fell by around 2.42% in the same period.
The bans by the PBOC also reached foreign exchanges that offer their services in China, as that institution considers them illegal. They also strictly prohibited services that offer trading, order matching, derivatives for cryptocurrencies, and issuance of tokens.
In early 2021, China announced a severe crackdown against cryptocurrency mining. That caused a significant drop in the mining power that keeps the network safe and a crash in the price of cryptocurrencies.
China seeks to meet its climate goals by suppressing the mining of Bitcoin and other cryptocurrencies on its territory. The country expects to go from being the largest carbon emitter to being carbon-free by 2060.
Bitcoin Metrics After China’s Decision
Although the bearish force is a factor of great relevance, investors seem to continue to take advantage of discount prices.
Korean analyst Mignolet shows the cash flow ratio metric between activity on exchanges and transaction volume. That indicator has fallen to its lowest level since October 2020.
He also reviews the transferred token indicator to analyze all movement on the Bitcoin network. That reflects that the cryptocurrency is more active than in October of last year.
When analyzing the correlation of that data with past events, it is possible to think that investors are taking advantage of this moment to accumulate.
The Price Still Has Problems in the Short Term
The daily chart shows an undoubtedly bearish trend in the cryptocurrency market. The 8-day EMA and 18-day SMA are crossing to the downside and are working as dynamic resistances.
The 200-day SMA, which follows the higher trend, is also sending a negative signal.
Right now, there is short-term momentum under development, which could cause a drop to USD 38,000. If the bulls fail to defend the support at USD 40,200, that could be a likely scenario.
Buyers could still put pressure on the price in the short term and invalidate the FUD (fear, uncertainty, and doubt) raised by China.
Weekly Chart indicates that the Scenario is Not So Daunting
The weekly candlestick chart indicates the possibility that buyers who have triggered a medium-term bullish move will defend the support at USD 40,200. Furthermore, it reveals that there has been a profit above 40% from the low of USD 28,850 in late June.
However, the current scenario in lower time frames puts into play the bullish outlook in the short term. The bears are not very strong yet, so it is necessary to continue to monitor the current volatility.
By Willmen Blanco
