Bitcoin’s Barriers Grow, Under China Cryptocurrency Concern
After the People’s Bank of China issued a statement stating that digital tokens cannot be used as a form of payment, Bitcoin and other major cryptocurrencies dropped. The biggest token went below $40,000 for the first time since early February; falling as much as 10% to $38,973 on Wednesday; following a weeklong decline sparked by Elon Musk’s back-and-forth statements about Tesla Inc.’s cryptocurrency holdings. Ether, Dogecoin; and last week’s sensation, Internet Computer; have all dropped in price.“This is the next chapter in China tightening its grip on crypto,” said Antoni Trenchev; managing partner and co-founder of Nexo, a crypto lender based in London.
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PBOC’s official WeChat account Cryptocurrency:
According to a message released on the PBOC’s official WeChat account; virtual currencies should not and cannot be utilised in the market since they are not genuine currencies. The warning stated that financial and payment institutions are not permitted to price products or services using virtual currency. The statement doesn’t have any new regulatory steps, according to Yu Lingqu, a vice-director at the China Development Institute think-tank in Shenzhen. The notice was conveyed by the central bank but compiled by industry associations rather than government officials; making it less powerful, according to Liu Yang, a lawyer at Beijing-based law firm DeHeng Law Offices.
Bobby Lee, founder, and chief executive officer of cryptocurrency:
“They just want caution,” said Bobby Lee, founder, and chief executive officer of crypto storage provider Ballet. “They feel the market is over-hyped; there’s speculative trading; they’re looking out for the best interests of the people.” Beijing since 2017 has abolished initial coin offerings and clamped down on virtual currency trading within its borders; forcing many exchanges overseas. The country was once home to about 90% of trades but the lion’s share of mining and major players have since fled abroad. China has recently taken steps to issue its own digital yuan; seeking to replace cash and maintain control over a payments landscape that has become increasingly dominated by technology companies not regulated like banks.
“It’s no surprise to me, as Chinese capital controls can be challenged by cryptocurrency purchases in the country and transfers out of the country,” said Adam Reynolds, CEO for APAC at Saxo Markets. “So avoiding the use of them in the country is essential to maintaining capital controls. The only tolerable digital currency to a government with strong capital controls is their own CBDC.”
Many chartists and technical analysts; are looking at Bitcoin’s 14-day Relative Strength Index (RSI); which entered oversold levels Tuesday; as well as the 200-day moving average of around $39,800. Breaching the 200-DMA could mean it drops to $30,000; where it’s previously found support.
“Long Bitcoin” China:
Meanwhile, the latest Bank of America fund manager; survey showed that “Long Bitcoin” is the most crowded trade in the world right now. The poll captures 194 fund managers with $592 billion worth of assets under management overall. “When an asset becomes the most crowded trade in the BofA survey; it has frequently signalled a near-term pullback in the past;” said Matt Maley, chief market strategist for Miller Tabak Co. “When you combine this with the news out of China; it’s not a surprise that Bitcoin is seeing some more weakness.”
For Stephane Ouellette; chief executive and co-founder of FRNT Financial, the moves have more to do with Musk’s recent tweets about Bitcoin. “TSLA’s entrance into space saw some of the most aggressive BTC buying I’ve personally; ever seen and it has to unwind,” Ouellette said. The EV maker’s retraction that it will accept Bitcoin as payment “was the catalyst that accelerated the spread consolidation. Then over the weekend; little comments here and there have continued to confuse,” he said.
