Bitcoin Down Trend Continues Amid Inflation Fears And Chinese Clampdown, But Traders Eye Key Support Level At $30k
Bitcoin continued its downward trajectory on Monday, touching a low of $31,700 on the Bitstamp exchange as markets digested an ominous inflation report from the US Federal Reserve coupled with an intensified clampdown in China.
The world’s leading cryptocurrency has now shed more than half of its value since reaching an all-time-high of $64,895 on April 14.
Hopes for a recovery grew earlier this month as bitcoin briefly moved above the $40,000 mark–a psychologically important level for many traders. But the down-trend resumed on June 15 with a decisive rejection from the 200-day exponential moving average on the daily chart.
That was followed one day later by a warning from the US Federal Reserve that inflation is likely to be higher than the central bank had originally forecast, raising the specter of an interest rate hike to cool demand.
Global stock markets fell on the Fed’s announcement, triggering a broad sell-off that spread to perceived inflation hedges such as bitcoin and gold (down 6% last week).
Bitcoin’s price then deteriorated over the weekend as it emerged that China is intensifying its clampdown on bitcoin mining.
Beijing had already ordered the closure of digital mining facilities in Xinjiang and Inner Mongolia, citing pollution from the coal-burning powerplants that provide electricity for miners based in those provinces. On Friday, it extended those measures to Yunnan and Sichuan–provinces that draw most of their energy from environmentally-friendly renewable sources.
The country, which is rolling out a Central Bank Digital Currency (CBDC) dubbed the Digital Yuan, has also banned financial institutions from conducting business related to cryptocurrencies.
Bitcoin is now within striking distance of its recent May 19 low of $30,066.
The cryptocurrency’s price appears to be interacting with the 144-day exponential moving average on the 3-day chart–which currently sits at about $30,000–having found support at the level three times in the past five weeks. Both of the previous touches triggered rapid but short-lived bull-runs of more than 30%.
The $30,000 level is also important to technical analysts as it provided support in late January, when bitcoin retraced from the then all-time-high of $42,000 before continuing upwards.
A sustained breach below $30,000 would embolden bearish predictions of $20,000–the all-time-high of the previous market cycle.
However, opinions are divided on the likelihood of that scenario. Bulls contend that both of the news events coinciding with the latest sell-off could actually be positive in the mid-term: bitcoin’s fixed supply makes it a natural hedge against monetary inflation; and its environmental credentials will only be enhanced by an exodus of miners from coal-dependent China.Source