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Bitcoin prices have dropped recently, losing more than 10% of their value after the closure of mining facilities in China’s Sichuan province reduced the nation’s mining capacity.
On Friday, local officials ordered businesses in the region to stop mining bitcoin, according to Global Times. Because of this, more than 25 of the largest companies involved in such activities were told to cease their operations, Business Insider reveals.
This latest development, combined with the actions taken by regulators in the East Asian nation’s Southwest and North regions, resulted in China closing down more than 90% of its bitcoin mining capacity, according to an estimate provided by Global Times.
[Ed note: Investing in cryptocoins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.]
The price of bitcoin fell to as little as $31,744.99 this morning, according to CoinDesk.
At that point, it was down more than 12% from yesterday’s intraday high of $36,119.80 and was trading at its lowest since June 8, additional CoinDesk figures reveal.
Following this decline, several technical analysts commented on the situation, helping outline some key levels of support and resistance, as well as emphasizing other key points that traders should know.
Bitcoin Trades Range-Bound
“BTC is now trading in a range,” said Julius de Kempenaer, senior technical analyst at StockCharts.com, a perception articulated by other market observers.
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“The lower boundary of that range is defined by the recent lows around $31k, together with the slightly older lows around $30k that makes a serious support area between $30k-31k,” he added.
“The upper boundary of that range is showing a similar pattern,” stated de Kempenaer.
“The two recent highs at the end of May and mid-June are around $41k. Together with the cluster of old highs and lows around $42k-$43k we can see the area between $41k-43k as a heavy barrier to the upside.”
The digital currency has made several attempts to break through resistance at $42,500, noted Jon Pearlstone, publisher of the newsletter CryptoPatterns, and following these failures, it has “fallen back under $35,000 with increasing volume.”
Limited Upside Potential
After bitcoin suffered these repeated defeats, some market analysts voiced concerns about the digital asset’s short-term upside potential, describing it as limited.
David Keller, chief market strategist at StockCharts.com, spoke to this situation.
“What strikes me about the chart of Bitcoin is the bearish momentum configuration,” he said.
“Every rally in Bitcoin since January has been punctuated by a lower momentum reading.”
“This indicates minimal upside potential and stronger downside pressure.”
Notable Downside Risk
In contrast, market observers described the potential bitcoin has for suffering losses in the near future as significant.
More specifically, they emphasized that if the cryptocurrency falls below key support levels, it could fuel a sell-off.
Pankaj Balani, cofounder & CEO of Delta Exchange, stated that:
“A conclusive breakdown below $30K might be coupled with heavy selling activity in BTC and entire crypto market.”
Keller provided a similar viewpoint, noting that if bitcoin declines to less than $30,000, it could cause “an influx of selling as speculators realize that level will no longer hold.”
Further, several analysts pointed out specific support levels that bitcoin could encounter if it breaks through current support.
Kiana Danial, CEO of Invest Diva, offered some perspective on this matter.
“Based on Fibonacci retracement levels tracing the most recent, medium-term uptrend that started in October 2020 and ended in April 2021, the $31,390 is a key support level falling on the 61% Fibonacci retracement and has been acting as support since May 2021,” she stated.
“A break below this level could open doors for further declines towards the 78% Fibonacci retracement level at $22,143.”
Pearlstone also chimed in, noting that if bitcoin falls below $30,000, “a retest of the prior cycle high at $20,000 becomes a high probability.”
Similar input was provided by de Kempenaer, who stated that if the digital currency drops “below the current range, the only meaningful support level is found around $20k.”
Disclosure: I own some bitcoin, bitcoin cash, litecoin, ether and EOS.
