Bitcoin Price Recovery Cut Halfway as China Ban Worries Bulls

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Yerevan (CoinChapter.com) — Bitcoin fell to its lowest level since early February after Chinese regulators accelerated its crackdown against financial institutions that operates in/via cryptocurrencies.

A statement issued by the People’s Bank of China on WeChat ordered financial companies to stop engaging with Bitcoin and similar digital assets. That included a complete ban on accepting cryptocurrencies as payments and offering services that concern them.

A cryptocurrency “is not a real currency” and “should not and cannot be used as a currency in the market,” China’s central banks said in a joint statement with internet and banking industry associations. Bitcoin, which was trading just shy of $40,000 before the announcement, fell to as low as $38,500 during the early Wednesday session.

Bitcoin enters oversold area for the first time since March 2020. Source: BTCUSD on TradingView.com

The Tesla FUD

The real headwinds for BTC/USD started late last week after Elon Musk announced that his company Tesla would discontinue taking payments for its electric vehicles in bitcoin. The billionaire entrepreneur cited environmental concerns related to bitcoin mining as his core reason, an explanation that drew flaks from hardcore bitcoin supporters, including Anthony Pompliano.

Musk then went after Bitcoin’s utility as he took elementary shots at the leading figures in the cryptocurrency community. At one point in time, Musk claimed that he would have Tesla dump its entire $1.5 billion bitcoin holding. By that time, his comments had panicked investors into selling their profitable crypto holdings. Bitcoin crashed to as low as $42,000 on Monday.

The China ban story acted as a bearish tailwind to the Musk narrative. As a result, the BTC/USD exchange rate plunged lower.

What’s Ahead for Bitcoin

The latest correction briefly pushed Bitcoin below its 200-day simple moving average for the first time since the coronavirus pandemic-induced crash in March 2020. Traders caught the local dip and the prices recovered in response. Meanwhile, the cryptocurrency’s relative strength index also fell into its oversold region, raising buying opportunities.

IntoTheBlock reported that recent sell-orders appeared from short-term holders as the number of addresses holding BTC for more than one year continued to climb.

Bitcoin addresses that has held onto their cryptos for more than a year. Source: IntoTheBlock

“57.61% of the addresses with a balance in BTC (21.94m) are holding +1year,” the data analytics platform said.

Analysts also noted that 30-40 percent corrections during massive BTC uptrends are a common sight. One of them pointed that the latest price dip also coincided with a spike in stablecoin (US dollar-pegged token) deposits across crypto exchanges, pointing that traders wanted to buy the BTC dip.