The recent troubles for Bitcoin and Ethereum were exacerbated yesterday after it was announced that China would ban financial transactions related to cryptocurrencies by financial and payment companies.
China advised investors and traders against using Bitcoin and other such instruments because of their highly volatile nature. This added fuel to the burning fire in the crypto market that was stirred recently by Elon Musk following his SNL appearance.
At one point, Ethereum had wiped out more than 50 per cent of its valuation amidst the inflating frenzy, having dropped from 4000.00 to 2000.00. The price has subsequently rebounded from this psychologically significant support level, but tensions remain high.
The price action is currently concentrating within the boundaries of a major Resistance Area. It stretches between the 50-day MA (in green) and the 38.2 per cent Fibonacci retracement level at 2794.1
The bullish pullback could reach as high as the psychologically significant resistance at 3000.0 before the underlying bearish pressure regains control yet again.
If the price of Ethereum establishes a decisive breakdown below 2000.0, the situation would likely be exacerbated even more. The price would then be likely to dive as low as the major Support Area (in green).
Bitcoin's current outlook seems even more bearish compared to Ethereum. At one point yesterday, the price had even sunk to the psychological threshold at 30000.00 before momentarily rebounding back up.
As can be seen on the daily chart above, the price of the crypto is currently consolidating below the 200-day MA (in purple), which represents a crucially important floating resistance.
Even if the underlying pullback manages to break out above it and test the 61.8 per cent Fibonacci retracement level at 42260.29, selling pressure is only likely to increase in the short term.
At least one additional test of the psychological support at 30000.00 seems highly plausible at this point, and a potential breakdown below it would imply that bearish momentum would likely be here to stay.