BTCCNY seems to be hitting a ceiling at the area of interest visible on the 4-hour chart. Price is testing the resistance at the 100 SMA dynamic inflection point close to the 38.2% Fibonacci retracement levels.
These retracement levels span former support/resistance areas seen on short-term charts so there is a significant amount of orders waiting in that area. If these keep gains in check, BTCCNY could gain further downside momentum to the swing low near 4800.00.
The 100 SMA crossed below the 200 SMA to indicate that the path of least resistance is to the downside. This means that the selloff is more likely to resume than to reverse. Stochastic is heading down, also indicating that sellers are taking control of price action, while RSI seems to be turning lower as well.
A move past the 6400.00 area could still open the possibility of a rally for BTCCNY, although it’s hard to imagine what kind of catalyst could push it back up to the swing high near 9000.00. After all, recent market updates suggest that demand for bitcoin in China could see a downturn.
Following reports that Chinese government officials are starting to crackdown on bitcoin exchanges and clients, a couple of major bitcoin platforms in the mainland announced that they would no longer offer margin accounts since these would magnify the risks involved in bitcoin trading. Other exchanges are also expected to make similar announcements in order to comply with government restrictions.
Because of that, Chinese investors could be discouraged in trading bitcoin, although some holdings might still be maintained. Still, this might be enough to discourage new traders from putting money in BTCCNY for fear of penalties based on anti-money laundering and KYC checks. Note that China is the largest market for bitcoin so this decline in volume could take a huge toll on the cryptocurrency’s gains.
Meanwhile, bitcoin could still remain supported in the rest of the global market, as several risks are present. For one, the upcoming Trump inauguration could spur enough profit-taking and unease, drawing traders away from US securities and onto alternative assets like bitcoin. Brexit negotiations in Europe would also prove exciting but the uncertainty it poses on euro zone and London markets might also discourage investments in traditional securities.
With these opposing forces, it’s likely that we’ll see a few more months or weeks of bitcoin consolidation, whether it’s against the dollar on the Chinese yuan. However, more reports on restrictions and penalties on exchanges in China could further dampen BTCCNY price gains and lead the pair to unwind its rally for the rest of the year.