At the beginning of September, Chinese authorities issued a ban on ICOs. This was the beginning of the storm. Bitcoin’s first drop of 21% was halted by buyers at 3,900 USD. The regulator then started hinting at unlicensed exchanges to start closing down voluntarily. The psychological barrier of 4,000 USD couldn’t resist the second wave of bitcoin sales. After breaking through this level, the storm became a hurricane. Over the course of the last two and a half days, the price has collapsed by 24%. So, since the start of this period, the bitcoin has fallen by 39%, from a high of 4,970 USD all the way down to 3,024 USD.
The National Internet Finance Association of China (NIFA), founded by the People’s Bank of China, released a notice labelling bitcoin as a speculative instrument used for illegal fundraising and money laundering. Of cryptocurrency exchanges, they said that they’re platforms that lie outside of China’s legal framework.
China’s official ministry for finance regulation has demanded all cryptocurrency exchanges (including OKCoin and Huobi) to make a decision and choose a date for halting their trading operations by the end of the next day. The ViaBTC exchange has announced that it will cease operations on the 30th of September, 2017. The exchange is expected to block funds withdrawals within the next two weeks.
Now let’s see what technical analysis has to tell us. I warn you now that TA doesn’t work against the fundamental signals created by the Chinese regulator. My markings show price levels, from which we could see an upwards reversal. Don’t be fazed by the large number of lines and labels. This is my road map, al lines are important.
Labels on the chart:
- TR – trend line from the 888 USD base (23/03/17)
- TR1 – trend line from the 3,003 USD top (11/06/17)
- TR3 – line of the C-C channel
- A-A – upwards channel projected from the 1826 base (16/07/17)
- B-B – downwards channel, projected from the 4970 top (02/09/17)
- C-C – upwards channel projected from the 2690 (25/05/17) and 4970 (02/09/17) tops. A copy of the line has been imposed on the 1826 base (16/07/17).
Below is the daily chart for BTCUSD. After breaking through the lower line of the A-A channel, the bitcoin price dropped to the 61.8% Fibo level at 3,027 USD in a retracement of the upwards movement from 1826 to 4970. Lower down, we have 2,935 USD, which is 505 of the upwards movement from 888 to 4970. There’s currently a nice support for an upwards rebound.
Now, it’s very important to see how the day closes. At the time of writing, one bitcoin on the Bitfinex exchange is worth 3,035 USD. The bears have broken through the lower boundary of the C-C channel. Considering that the cryptocurrency market is young and has low liquidity, market participants currently panicking could push the bitcoin down even further.
With the price falling at its current rate, I can only see one level; 2,450 USD. This is the 61.8% Fibo level of the upwards movement from 888 to 4970.
Cycles indicate a rise for the bitcoin from its current level. There’s a strong support zone ranging from 2935 to 3027. Now we need to wait for the crowd to settle down and for the price to bounce up past 3,400 USD in the next 2-3 days. If this happens, we can start to think about a further price recovery. There are no bullish signals on the indicators at the moment. For now, I’m relying on price levels and cycles.