Bitcoin, the world’s largest cryptocurrency, has recovered from a five-month low and regained above the psychological level of $30,000. Last month, the digital asset tried to bounce back on four different occasions after posting big drops. On Tuesday, Bitcoin fell below $30,000 as China urged its biggest banks and payment firms to make cryptocurrency trading tougher. The currency last traded below this level on January 28, 2021. Ethereum, the world’s second-largest cryptocurrency, also fell below the $2,000 level.
The cryptocurrency market rallied a bit on Wednesday, with Bitcoin reclaiming the $35,000 level and Ether climbing above the $2,000 region. According to BuyUcoin CEO Shivam Thakral, BTC has been under pressure lately due to panic selling from Chinese miners.
“Iran’s reaction to Bitcoin may also have contributed to the price drop. These are instantaneous responses and should not be viewed as a long-term trend. This is a healthy pullback and will stabilize in the long run. In the medium and long term, the upward trend is still solid.”
Reports say that as a result of the pressure in China, 90% of the country’s BTC mining capacity will be shut down. 65-75% of the world’s Bitcoin mining takes place in China. Bitcoin mining is seen as important to the entire crypto ecosystem as it allows the system to work by confirming transactions. Meanwhile, mining companies began to move to other countries, including Kazakhstan, to avoid restrictions in China.
What to do now?
According to experts, the latest developments in China have had a short-term effect, prompting market participants to act cautiously. Sumit Gupta, CEO and co-founder of CoinDCX:
“Declining trading volumes in crypto assets such as Bitcoin point to an ongoing period of consolidation. This is also a positive thing for future price action. We can say that large assets such as Bitcoin and ETH have survived excessive volatility in the past. Investors and traders are advised to do their research before taking new positions and keep a strict stop-loss for short-term bets.”
In terms of technical analysis, despite the massive correction from the all-time high, Bitcoin has seen strong trading volumes between $32,000 and $38,000 over the past two weeks. The overall market cap of the cryptocurrency market has dropped by about 27% over the past seven days, while Bitcoin has experienced a drop of about 20% in market cap.
“Bitcoin’s market dominance has increased from 41% to 47%, indicating increased interest in Bitcoin as a better store of value compared to other crypto assets,” said Nirmal Ranga, ZebPay vice president of commerce. The curve in the chart shows that Bitcoin has been aggressively bought by the bulls during the last three months when it has bottomed out. Ranga added:
“Despite the bear market indicator, there are subtle signs of an emerging reversal pattern and a ‘morning star’ formation after the ‘hammer’ could soon emerge. A sustained hourly price above $34,000 should confirm the reversal.”