Bitcoin could turn bullish again, but the price needs to breach $35,000
The cryptocurrency market is still under regulation pressure.
BTC has been moving inside a range between 30-41K USD since the 19th of May. 5 weeks without any clear trend – this is a serious psychological challenge for beginners in the financial market, especially for new crypto-traders, who came for quick results.
But this is a common situation for professional traders, for those who have been trading for many years. Professional knows that after long consolidations always comes a huge movement. And all you need is to be prepared for this moment.
BTC now down around 50% from its April peak. And the main question for the crypto community is: “So, is this the bottom or not?” Without any doubt, crypto bulls are here, the support area of $31,000 per BTC has been worked 5 times already.
BTC/USD price chart (D1)
Source: TradingView
However, the price didn’t breach the resistance area at $41,000, so the signal of a potential uptrend moving doesn’t exist yet.
What is the main reason for the crypto market weakness?
In my opinion, it’s the Chinese crypto ban. But this weakness could bring benefits in the future. Why? Let me explain.
The People’s Bank of China has intensified its crackdown on crypto. The government said that “virtual currency trading activities disrupt normal economic and financial orders, breed the risks of illegal cross-border transfer of assets, money laundering and other illegal and criminal activities, and seriously infringe on the safety of people’s property.”
China focuses on CBDC. But why?
The question is – if the PBoC is so against traditional crypto, why are they creating their own digital currency? The answer in one word is CONTROL. The Chinese CBDC, or cyber yuan, stands to give Beijing the power to track spending in real-time, plus money that isn’t linked to the dollar-dominated global financial system.
China plans to have the world’s most advanced blockchain technology by 2025. But this means centralization and increasing their control.
The country is currently rolling out its CBDC, promoting it through lotteries across the country – $6.2 million digital yuan has been raffled for Beijing residents in the lottery. China has also added digital yuan support to over 3,000 ATMs across Beijing. And several banks in China are already offering cash exchange services for the digital yuan.
Chinese ban on miners – is it a smart decision?
The regional Chinese government in Sichuan announced it would be shutting down more than two dozen suspected cryptocurrency-mining operations in the hydroelectricity-rich region.
Bitcoin mining facilities in other parts of China received orders to cease operations. Yunnan province, Xinjiang, Inner Mongolia, and Qinghai have also ordered crypto mining operations to shut down amid investigations into the alleged illegal use of power for bitcoin mining activities. The move has also seen China prohibit financial institutions from using crypto services.
China was the crypto-mining capital of the world. But that time is over.
In the aftermath of the mining ban in Sichuan, which shut down over 90% of the country’s crypto mining, Chinese miners are moving their operations to other, more crypto-friendly nations like the US, Kazakhstan, Canada, and Russia. Mining has become a geopolitical decision concerning monetary policy and the wealth of nations.
Does this affect users?
Large-scale bans on bitcoin mining in China have seen a decline in the mining hash rate levels reached in 2019. Bitcoin’s hash rate was on an uptrend in 2021, hitting 198M TH/s on May 15. It has since dropped to nearly 58.46M TH/s for Jun 27 2021.
Bitcoin Network Hash Rate is at a current level of 58.46M, down from 88.19M yesterday and down from 115.23M one year ago. This is a change of -33.71% from yesterday and -49.27% from one year ago. Most Chinese Bitcoin pools like AntPool and F2Pool have witnessed a drop of more than 50% in their hash rate.
The miner shut-down is temporary. However, a drop in the hash rate means chances of landing on the correct hash to earn Bitcoin are very low. In addition to miners from China trying to shift shop offshore as soon as possible, Bitcoin has an in-built safeguard that will push hash rates level back up with time.
The largest infrastructure displacement in modern history is taking place – roughly 45% of the bitcoin mining industry is relocating to other countries and continents.
What are the prospects for BTC?
The psychological $30K support level has held strong as Bitcoin prices rise back into their range-bound channel. Currently, the price is trying to breach the first resistance level at $35K per BTC.
BTC/USD price chart (H4)
Source: TradingView
After a potential breakout of the current resistance, the next target will be $41K per BTC. However, as long as the pressure of regulators on the market persists, we all should be prepared for a potential decline to the level of $20K.
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Olga Prokhorova
Chief Educational Officer
VRM trade
Disclaimer: All investment strategies and investments involve the risk of loss. Nothing contained in this article should be construed as investment advice. Any reference to an investment's past or potential performance is not, and should not be construed as a recommendation or as a guarantee of any specific outcome or profit.
