Bitcoin prices are trading under pressure and the recent decline has brought all the bitcoin bears out of the closet. There are now calls that bitcoin will drop down to $1,000 this year while just 6-weeks ago the calls where that the cryptocurrency would hit $35,000. Exchanges remain under fire as Indian banks have significantly reduced the functionality of bitcoin wallets. The technical outlook shows that prices are continuing to trade under pressure.
Bitcoin exchanges are losing their luster in India, as many top Indian banks have suspended and curtailed the ability to trade on bitcoin exchange accounts. State Bank of India took action toward crypto exchanges, either completely closing accounts or reducing the account’s ability to trade. The banks cite the risk of dubious transactions as a reason for the crackdown.
The catalyst for the banking moves follow a request by advocate Bivas Chatterjee who filed a public interest litigation in Calcutta to crack down on bitcoin and impose regulations on other cryptocurrencies. Additionally, the Ministry of Finance referred to Bitcoin as a ponzi scheme and is in favor of further reduction in cryptocurrency trading. The Finance Minister of India also said that at present, the Indian Government does not recognises Bitcoin as a legal tender of money.
The regulatory outlook toward bitcoin continues to tighten. The U.S. has moved to regulate bitcoin in cash format as well as in the futures market. Additionally, US Treasury secretary Steven Mnuchin reports that the G20 nations will begin working together to make sure that Bitcoin and other cryptocurrencies are properly regulated.
The lack of volatility in the equity, bond and currency markets has brought traders to the cryptocurrency markets which has helped generate whipsaw price action. It has also allowed prices to surge higher as well as drop recently. Traders have moved away from investing in commodity products such as gold and silver as bitcoin has stolen some of the luster from these investment products.
The technical continue to point to lower prices as bitcoin is forming a topping pattern. Each upward move has been a lower high, and each downward move generates a lower low. This type of pattern is a down trend. Resistance on bitcoin is seen near the 20-day moving average at 13,952. Support is seen near the January low at 9,222.
Momentum is negative as the MACD (moving average convergence divergence) index generated a crossover sell signal in January. The MACD is a momentum index that measures accelerating and decelerating momentum. The sell signal occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses below the MACD signal line (the 9-day moving average of the MACD line). The MACD histogram is highlighted in red with a downward sloping trajectory which points to lower prices for bitcoin.
Prices of bitcoin are may be oversold. The RSI (relative strength index) which is a momentum oscillator that measures accelerating and decelerating momentum along with overbought and oversold levels, moved lower but remains above the oversold trigger level of 30, and reflects consolidation.
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