China’s 3rd largest bank ‘rugs’ BTC: 5 things to watch in Bitcoin this week
A statement threatening account closures for crypto activity causes mayhem before being deleted minutes later as FUD reigns supreme on Bitcoin markets this week.
Bitcoin (BTC) is lower going into a brand new a brand new has seen a take a look at of levels below $33,000, and bulls are troubled.
What can be next? With optimistic short-run voices few and much between, it looks that cryptocurrency simply is not of interest to investors immediately.
Against a background of macro market uncertainty, low volumes and claims of a securities industry high, Bitcoin includes a heap to try and do to convert the market that the nice times still lie ahead.
Cointelegraph offers 5 things to think about once charting what would possibly happen to BTC/USD within the returning days.
Spotlight on the Fed… again
The main focus for investors throughout the economy on is that the U.S. Federal Reserve.
After last week’s comments from Chair Jerome Powell, the U.S. greenback created robust gains, whereas stocks then staged a sell-off as market participants repositioned. The stock market index, for instance, fell 3.5% in a day in a very since last October.
The volatility came as a result of Powell hinted that the Fed may presently begin tapering the extent to that it intervenes within the market. This became normal follow as a part of its response to the coronavirus and also the economic shutdowns that followed.
A reduction in purchases, which CNBC noted currently comes to around $120 billion per month, therefore presents a noticeable switch-up.
Powell will speak again on Tuesday, this time before the Senate, and it is thought that he will give more information on the news that he broadly outlined last week.
“I’m most interested certainly in what Powell has to say,” Peter Boockvar, chief investment officer of Bleakley Global Advisors, said on Friday.
“They’re all going to give us now the fine print of what was in the statement and what Powell said.”
Should surprises appear, the volatility that characterized the past few days could continue. Good news for the dollar, as Cointelegraph often notes, tends to be bad for Bitcoin price action.
“I didn’t get good vibes from BTC chart when I woke up,” popular trader Crypto Ed summarized as the week began.
“One of the reasons is IMO the sudden strength in DXY since last week.”
He added that the dollar could continue to “pressure” Bitcoin until the U.S. dollar currency index (DXY) hits around 94 from its current levels of 92.2.
Chinese bank deletes anti-crypto statement in minutes
It’s not a good look for Bitcoin spot price action as the week gets underway — but who’s to blame?
In addition to the Fed, another economy is wielding its influence on crypto markets again, this time more directly: China.
In a statement, the Agricultural Bank of China, the country’s third-largest lender, explicitly stated that its services must not be used for cryptocurrency-related transactions.
“Agricultural Bank of China issued a notice that they will not participate in virtual currency transactions and related activities,” China-oriented news resource 8btc reported, translating the original document for social media users.
“Customer accounts participating in such activities will be closed and customer relationships will be terminated.”
The result of its publication was instantly recognizable — Bitcoin plummeted by over $1,000 in minutes before rebounding to $33,000.
Such behavior is far from surprising, but patience is now wearing thin over knee-jerk reactions to China. The latest episode proved to be a case in point — the bank deleted the statement shortly after publishing it, but the damage was done.
Overall, nothing has fundamentally changed in the Chinese government’s position on Bitcoin since its controversial trading ban came into force in September 2017.
“Half the Bitcoin network has now been shut down by China. Bitcoin hash rate at levels of mid-2020,” Charles Edwards, CEO of asset manager Capriole, noted in a series of tweets on the mining crackdown that formed the previous source of Chinese price pressure.
Others argued that Bitcoin has gained new opportunities thanks to the punitive measures from both banks and government — mining will shift elsewhere, and the network will flourish as a result of making use of friendlier, more reliable jurisdictions.
“The ‘China-dominated’ Bitcoin mining era may be coming to an end.” Alex Gladstein, chief strategy officer of the Human Rights Foundation, commented on a farewell message from one miner in the province of Sichuan.
“It will be a source of rich irony for future historians to teach that the world’s free, open, and decentralized monetary network was secured in its early years by individuals inside a repressive dictatorship.”
Bitcoin’s “Rick Astleys” are back
As $30,000 support lurches ever closer, concern and confusion characterize reactions over BTC/USD performance on Monday.
This is because indicators of a bullish turnaround are there, but price has so far done the opposite.
One of them is funding rates, which firmly favor bulls. At the time of writing, rates are negative across exchanges — a classic sign that a move up is on the way.
Moves among seasoned hodlers confirm the trend, with coins being ferreted away even at levels before Monday’s dip.
“Oh my, Rick Astley is back,” statistician Willy Woo declared alongside a chart showing Bitcoin’s decreasing liquid supply. “Rick Astley” refers to a popular metaphor for strong hands.
“Coins are moving back to the HODLer who never deserts his BTC.”
Analyst William Clemente III added that this “re-accumulation” echoed what happened in 2013 when Bitcoin had two bullish phases separated by a major retracement.
“HODLers stacking BTC heavily here,” he confirmed, noting net position change data.
Fundamentals echo uncertainty
China has had a significant impact on Bitcoin network fundamentals.
As Edwards noted above, thanks to a broad miner shutdown, thhash rate has fallen significantly from its peak just months ago.
This is troubling in the short term, particularly for those who adhere to the classic mantra of “price follows hash rate,” but is necessarily short lived.
Thanks to Bitcoin’s inherent setup, there is always an attractive opportunity to mine somewhere under different circumstances. A miner rout incentivizes participation on the network thanks to the hash rate, and subsequently difficulty, dropping.
The cost of participation thus reduces, and mining becomes a viable proposition for more and more potential entities.
Meanwhile, Adam Back, CEO of Blockstream, is at pains to stress that the impact of China on the hash rate has been at most around 39% from the top. Figures vary widely because the hash rate is an estimate and is ultimately impossible to measure definitively.
Is it really that bad?
Not everyone thinks that the outlook for Bitcoin is all bad news.
Some comparisons to previous bull market years place 2021 solidly within the framework of standard price performance.
As popular Twitter analyst Root highlighted on the weekend, on-chain indicators are flashing “oversold” rather than bearish despite current external pressures.
Others, such a stock-to-flow model creator PlanB, are even bullish on practically every timeframe beyond the daily chart.
As Cointelegraph reported, his “worst case scenario” is now $135,000 for BTC/USD by the end of this year.
Stock-to-flow has accommodated all of 2021’s price surprises and remains valid.