A Crucial Week for Bitcoin
The Chinese authorities seem to be pretty determined to prick the bitcoin bubble and that of the other crytocurrencies as well. While the people from China have been the biggest investors and miners of bitcoins and other cryptos, they have also been launching many number of ICOs and this is the main thing that seemed to have ticked off the authorities. These ICOs were supposed to be an avenue for budding entrepreneurs to collect funds for their projects in an easy and quick manner but as with any method that is easy, this avenue began to be exploited by unscrupulous entities.
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ICOs Being Misused
Many ICOs were launched in China under the guise of projects that never took off. These ICOs had only website and a white paper and after funds were collected, which ran into millions in certain cases, there was no progress and the people who invested in these ICOs, in return for coins, were defrauded. Some of these ICOs were also used as conduits for taking funds out of the country and also for bringing unaccounted money into the country as well. All these were being done in a unregulated manner and there were many such ICOs and schemes based out of them which caused a lot of investors and traders to lose their hard earned money.
This seemed to have been the breaking point for the Chinese regulators, who banned all ICOs last week and announced that Chinese people should not invest or launch any ICOs. Those who had collected funds through ICOs were asked to return them back and the platforms that were used for launching ICOs were to be regulated and audited as well. This led a large crash in the bitcoin and ethereum prices, as also that of other coins as well. The Chinese traders sought to liquidate their holdings in fear of further regulation and the ICO owners also tried to dump their holdings into the market so that they would not be traced in the future. This led to large scale selling of the bitcoins and ETH as well and the Chinese were joined by traders from other parts of the world as the effect snowballed.
Bitcoin Prices Suffer Steep Fall
The bitcoin prices crashed from their highs near $5000 to the strong support at $4000 while the ETH prices crashed from near $400 to the $270 region on the back of this selling. The situation seemed to improve towards the middle of the week as the market began to come to terms with this ban and began to look forward but the fear underneath was clear for everyone to see. It needed only one more small spark to ignite the selling and that came towards the end of the week as there were reports that the Chinese regulators would go after the crypto exchanges in China as well and ban them too. So far,there has been no such official announcement but the traders did not bother to wait and that led to another round of selling which has led the bitcoin and the ETH prices back to their lows again.
This makes the upcoming week a crucial one for bitcoin as the market would be looking out for any such announcement from China and if it turns out to be true, it could lead to another major round of selling in bitcoins. On the other hand, the market would also be looking for any such bad news from any other part of the world and watch out for how the situation develops. If the news about the exchange ban turns out to be false, then we could be in for a major bullish run in the bitcoin prices as the buyers return but any such short term moves will have to be carefully handled.
Price Regions To Note
From a technical standpoint, this could be viewed only as a correction so far as the bitcoin prices have managed to bounce off the strong support at the round figure of $4000 and this has happened twice. Both times, the bounce from the support has been strong which means that several buys and stops could be building up in this region every time there is a bounce and this would only make this support stronger.
If the prices do manage to break through the $4000 region, then the next target would be $3800 and then $3600 on the downside. If the news turns out to be false and we see a bullish leg in the prices, then the target would be $4600 and any progress beyond this region would be doubtful at this point of time when there is so much uncertainty around.
We believe that this is a sign of maturing of the market as more and more regulations begin to come in to ensure the correct flow of funds in this industry and once such drastic actions from the Chinese and other regulators have the desired effect, they would be stepping in to restart the whole market again in a regulated manner under their purview. This should help to keep the bitcoin prices buoyant in the medium and long term.
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This article was originally posted on FX Empire
