Bitcoin and other digital currencies have fallen sharply after China dropped yet another bombshell on cryptocurrencies. The latest crackdown came from People's Bank of China, reportedly saying all crypto-related transactions are illegal in the country.
China’s ongoing clampdown continues to weigh on sentiment. Although other countries – most notably El Salvador – have warmed to cryptos, the fact that the world’s second largest economy and most populous state – with about 18.5% share of the world’s population – refusing to play ball cannot be ignored by crypto enthusiasts.
Yet, the adoption of Bitcoin and other digital currencies by a growing number of companies is helping to keep the downside risks limited. Twitter has become the latest household name to adopt Bitcoin, allowing users to ‘tip’ their favourite creators on the social network using bitcoin. Although this feature was already introduced back in May, Twitter said it will now roll it out globally to all Apple iOS users this week, with Android to follow in the coming weeks.
As more and more companies adopt cryptos and transactions increase, this should help keep the downside risks limited. But China is the major risk that is likely to keep prices under pressure for a while. So, the risks are skewed to the downside for now.
As such, Bitcoin may fall further in the short-term outlook and head back down to $40K – or lower. The bias would only turn positive once prices break out from the falling wedge pattern to the upside, or create a major reversal pattern at lower levels first.
Source: ThinkMarkets and TradingView.com
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