BTCCNY broke out of its symmetrical triangle consolidation pattern and is making its way up to the 7000.00 mark. The upside breakout suggests a strong return in bullish pressure as price has been trading sideways for quite some time on lower liquidity.
Increased oversight on bitcoin exchanges in China has been blamed for dampening bitcoin price gains but it was only a matter of time before a breakout ensued. Last month, Chinese authorities had been busy investigating bitcoin firms and clients in an attempt to rein in activity and prevent offshore investment. In doing so, they are hoping to curb yuan speculation and bring more funds back to the domestic economy.
This dampened bitcoin activity in the mainland for quite some time as investors were wary of penalties and restrictions. A number of exchanges already ceased offering margin accounts on bitcoin and even charged higher transaction costs for trades. However, this doesn’t seem to be enough to discourage investors from putting money in the higher-yielding asset, especially with all the uncertainty in the global economy.
For one, the Trump administration is seen as the biggest flight risk of all, as the US President recently called out China and Japan for manipulating their currency. This led analysts to speculate about a potential trade or currency war among the nations, likely spurring slow global growth and declines in local exchanges. Earlier today, data from China came in mixed with the official manufacturing PMI down from 51.4 to 51.3 and the non-manufacturing PMI up from 54.5 to 54.6.
Chinese banks are still closed for the holiday today so a large position must’ve tipped off the breakout. Others are also pointing the figure on dollar weakness, as Trump’s comments and downbeat US economic data combined forces to trigger a selloff in the US currency. Either way, the latest BTCCNY move suggests that further gains could be in the cards.
However, the 100 SMA is still below the longer-term 200 SMA so the path of least resistance is to the downside. The gap between the moving averages is narrowing so an upward crossover might be imminent, drawing more buyers to the mix. In that case, the moving averages could also hold as near-term areas of interest in the event of pullbacks.
RSI is heading north but is already in overbought territory so profit-taking might happen and trigger a correction. Similarly, stochastic is starting to turn lower from the overbought zone to suggest that sellers are trying to regain control of price action. In that case, BTCCNY could retreat to the 6500.00 area before heading much higher. A break below this area of interest could open the door for a longer-term downtrend once more.