The People's Bank of China (PBOC) said that all cryptocurrency activities, including trading, investing, mining and using them as means of exchange, are illegal. This decision rattled crypto markets as China's crackdown on these high-risk assets pummelled the price of Bitcoin.
This is the latest episode in the country's ongoing battle to clamp down on the crypto sector, which brought even more uncertainty in an already volatile market.
The price of Bitcoin broke down below the lower limit of the ascending channel, underpinning the beginning of a new downtrend. The initial breakdown was followed by a throwback to the channel from below before PBOC's statement from earlier today bolstered the rapidly rising bearish sentiment.
This sudden upsurge in bearish momentum is highlighted by the MACD indicator as the histogram turns negative. Its current reading seems to imply the likely continuation of the downtrend further down south.
It is interesting to point out that the bearish reversal occurred just below the 61.8 per cent Fibonacci retracement level at 45301.40, which was the last Fibonacci threshold. Subsequently, the price action broke down below the 38.2 per cent Fibonacci at 43116.02 and is currently probing the opposite Fibonacci extreme - the 23.6 per cent Fibonacci at 41764.04.
If the price action manages to consolidate above the latter, a minor pullback to the 38.2 per cent Fibonacci may ensue next. This threshold is about to be crossed by the 50-day MA (in green) and the 100-day MA (in blue), thereby making it an even more prominent support-turned-resistance barrier.
Conversely, a decisive breakdown below the 23.6 per cent Fibonacci may be followed by a dropdown to the previous swing low at 40000.00. The latter represents a psychologically significant support level which is where bulls would have the best chance to prevent further losses by taking charge of the downtrend.