The bitcoin-US dollar exchange rate (BTC/USD) may have climbed back above $4,000, but it might be ready to push higher even though China uncertainty reigns supreme.
Following reports the country’s regulators may be seeking to shut down domestic bitcoin exchanges, the bitcoin price fell to a low of $3,977 on the CoinDesk Bitcoin Price Index (BPI) this weekend. The rumor comes a week after the People’s Bank of China (PBOC) banned initial coin offerings (ICO), suddenly outlawing the practice of creating and selling cryptocurrency to investors to finance startup projects.
The confusion about what might lie ahead cut short bitcoin’s ascent on Friday following a repeated technical failure around $4,650 levels, and the subsequent sell-off was exacerbated by the bearish news out of China.
So far, Bloomberg and the Wall street Journal are out with the reports today, suggesting the ban will be limited to exchange-based trading and will not affect over-the-counter transactions.
Further, wires are reporting that the price of bitcoin could drop below $4,000 if China bans trading on continuous order books of the larger exchanges. China’s biggest exchanges and traders across the globe are still waiting for official confirmation.
Investors aren’t buying it
All in all, it’s no wonder the trading is subdued this Monday morning.
However, bitcoin has been successful in defending the psychological support of $4,000 – meaning price action indicates investors do not think China would shut down bitcoin exchanges, or that if they did, it would only have a limited impact.
No news is good news
It’s been 72 hours since the news of a China exchange ban broke out, and we are yet to hear official confirmation or denial. The broader market sentiment remains positive, hence, no news (official confirmation or denial) will be taken as good news.
Thus, investors may start snapping up bitcoins at current levels, although in such a case the digital currency would take a big hit if China, following a prolonged silence, suddenly confirms the ban.
Bears may be salivating at the idea of a big sell-off following the breach of the rising trend line, although, what we have now is a symmetrical triangle pattern.
The symmetrical triangle, which can also be referred to as a coil, usually forms during a trend as a continuation pattern. The pattern contains at least two lower highs and two higher lows. Prices typically breakout in the direction of the prior trend, i.e. in BTC’s case, an upside breakout will signal resumption of the rally from the June 16 low of $1,826.
One may feel tempted to bet on the direction of the breakout, however, it may be advisable to stay on the sidelines and only trade the breakout.
One reason is that the 5-day moving average and the 10-DMA moving average are now capping the upside in bitcoin. The 14-day RSI is dangerously close to being bearish.
- A downside break [an end of the day close below the symmetrical triangle floor] would mean bitcoin has made a near-term top at $5,000. The subsequent move lower could be extended to $3,164 (200-day moving average).
- A bullish move is seen gathering pace following a break above $4,500. The level marks the confluence of the rising trend line resistance and symmetrical triangle resistance. Fresh record highs could be seen if prices break above $4,500.
Disclaimer: This article should not be taken as, and is not intended to provide, investment advice. Please conduct your own thorough research before investing in any cryptocurrency.
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