China Crypto Clampdown Sends Bitcoin Closer to Key $30,000 Level
China’s intensifying cryptocurrency crackdown has left Bitcoin flirting with $30,000, a price level seen as key to the short-term outlook for the largest virtual currency.
Bitcoin fell as much as 4.3% Tuesday to $31,171, and for some a breach of $30,000 would hurt sentiment and raise the risk of a steeper selloff. It was trading at $31,500 as of 10:42 a.m. in London.
“We’re most likely going to continue to trade within the $30,000 to $40,000 range and, hopefully, $30,000 will hold as the low of the year,” said Antoni Trenchev, co-founder of crypto lender Nexo in London. “If not, we should revisit $25,000 and even $20,000 before the next leg up.”
China’s latest broadside came Monday, when the nation’s central bank said it had summoned officials from the biggest lenders as well as AliPay to reiterate a ban on cryptocurrency services. Concerns about the environmental impact of the energy-hungry computers that underpin Bitcoin also continue to swirl. Chinese officials are already trying to root out crypto mining operations.
Meanwhile, the prospect of reduced stimulus as the global economy recovers from the pandemic is also sapping the appetite for speculative investments.
A conclusive break below $30,000 would mean a “massive hit” to sentiment and possibly “heavy selling activity” across the cryptocurrency market, Pankaj Balani, chief executive officer of digital asset derivatives exchange Delta Exchange, wrote in an email. But he expects the coin to rebound and challenge $40,000 in coming weeks.
Crypto advocates continue to argue that the tokens are a dependable store of value. Michael Novogratz, founder and chief executive officer of Galaxy Digital, called Bitcoin “digital gold” at the Qatar Economic Forum on Tuesday.
“If you’re going to be long gold, Bitcoin is a better version because it’s got the same macro tailwinds but it is also very early in the adoption curve,” he said. “I am still a big buyer of Bitcoin.”
An explosion in the popularity of so-called alternative coins outside of Bitcoin and Ether, as well as an increase in leveraged bets on the top two, were hallmarks of the crypto boom earlier this year. Both trends have ebbed in the wake of a rout in the sector in May.
Ether, the second biggest token, at one point slipped 4.2% on Tuesday. Retail favorite Dogecoin tumbled 27% over the past 24 hours.
“Most cryptocurrencies have lost upside momentum versus Bitcoin after having outperformed,” said Katie Stockton, founder of investment research provider Fairlead Strategies.
Bitcoin has roughly halved from a record of $65,000 in mid-April, though over the past year it’s still up over 200%. The wider Bloomberg Galaxy Crypto Index has more than quadrupled over 12 months.
“Negative trading conditions in the market are coming from an overly long position built up in the strong first-quarter runup that has not cleared itself out yet,” said Adam Reynolds, chief executive officer for Asia-Pacific at Saxo Capital Markets Pte.
©2021 Bloomberg L.P.