BTCUSD has been selling off after testing record highs recently due to profit-taking and as a reaction to Chinese government action. Last week, monetary authorities in the mainland warned consumers and exchanges about bitcoin trading and investment, emphasizing that it is not currency and shouldn’t be treated as such.
Bitcoin firms were prompted to cancel marketing events that promote the anonymity of BTCUSD trading as authorities reiterated the need to implement KYC and AML checks on trading. With that, investors continued liquidating their long positions and might continue to do so in the next few days.
Bitcoin price found support around $815 and has since pulled up to the 61.8% Fibonacci retracement level on the latest swing high and low. Price is still stalling close to the 38.2% Fib and might be ready to drop back to the previous lows and beyond. The 100 SMA has crossed below the longer-term 200 SMA on this time frame to confirm that sellers are taking control of price action.
RSI is heading south but is nearing the oversold region, possibly drawing some bullish pressure to the game. Stochastic is treading sideways near the oversold region as well, but it has room to go lower so BTCUSD might follow suit.
On the longer-term time frames, it can be seen that BTCUSD is still on a steady ascent and is moving above a rising trend line connecting the lows since August 2016. However, price is moving dangerously close to this support zone and several technical areas so a break below the $700-800 area could constitute a long-term drop.
On the other hand, if the support area keeps losses in check and investors regain confidence in BTCUSD, price could still recoup its recent losses and go for a test of the $1000 area once more. For the time being, though, it seems that the Chinese government’s warnings has taken a huge toll on demand and the cryptocurrency might trade cautiously in the next few days.
Keep in mind that Chinese officials have already taken some action in the currency market, punishing sellers who bet that the yuan is in for more depreciation. Similar action could be imposed on bitcoin trading, although experts have mentioned that it will be much hard to implement than in theory.
Until investor confidence is revived, bitcoin could trade lower or sideways. A break below the nearby floor could trigger a test of the $500-600 area of interest in the next few weeks while a bounce could spark a climb back to $900.