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Chart of the day: Bitcoin’s Drawdown may be a Temporary Phenomenon


Bitcoin is trading in the red zone again. This morning, it hit a January low of $31,300. The main factor of pressure on the crypto currency (the capitalization of which has fallen by $ 300 million in the last three days alone) is the policy of the Chinese authorities.

The first were the regulatory authorities of Sichuan Province, which banned the mining of digital currencies. Yesterday, the country’s central bank issued a statement in which it “called on some banks and payment system operators to tighten the fight against cryptocurrency trading” and block relevant transactions). The financial institutions targeted by the NBK included China Construction Bank (SS:601939), Agricultural Bank of China (SS:601288) and Alipay Ant Group.

Given that the Asian country accounts for about 65% of the computing power of the bitcoin network, investors’ worries are logical. In addition, the World Bank refused to support El Salvador’s efforts to recognize bitcoin as a full-fledged means of payment, and Tesla (NASDAQ:TSLA) unexpectedly changed its position and refused to accept BTC as a payment instrument. As a result, the trading range of the already volatile token has expanded even more.

And don’t forget about the “hawkish” rhetoric of the Fed. The decision of the US central bank to revise the schedule for tightening the PREP has supported the dollar, reducing the attractiveness of bitcoin.

Nevertheless, the bulls seem ready to resist this barrage of negative news. Is their optimism justified?

BTC/USD – daily timeframe BTC/USD – daily timeframe

Despite the flurry of negative drivers, bitcoin has been successfully holding the defense for a whole month now.

The picture cannot be called rosy. At the time of writing this article, the entire increase this year has been nullified.

BTC has fallen below the uptrend line originating at the October lows. Relatively recently, a “death cross” has formed on the chart, and the MACD and RSI indicators support bearish sentiment. If the price drops below $29,000, the sale will accelerate.

But it is worth considering the scenario of a rebound to the upper limit of the monthly range. In this case, we can expect repeated testing of the broken uptrend line.

To summarize: at current levels, the stop losses of both long and short positions are very small, which creates the potential for disproportionately large profits.