21:43Bitcoin enters 'death cross' amid China crackdown
Bitcoin fell below $30,000 for the first time in months, and fears are growing among investors that the downward trend will continue.
Bitcoin dropped to $29,300 on Tuesday, the lowest level since early January, when it began a rally that peaked at it being valued at more than $63,000 per coin. The decline caused the cryptocurrency to enter what investors refer to as a “death cross,” which occurs when a security’s short-term moving average falls below its long-term moving average.
Bitcoin and other associated cryptocurrencies began falling from their April highs following regulatory pressure. David Sacco, a practitioner in residence at the University of New Haven finance department, told the Washington Examiner that both China and the United States were behind the recent collapse in value.
“In the last month, the governments of the two biggest economies, China and the U.S., have done things that at some level threaten all cryptocurrencies,” he said during an interview, highlighting the Colonial Pipeline ransomware attack and increased regulatory clampdowns by the Chinese government.
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Last month, cybercriminals linked to a Russia-based collective called DarkSide managed to hold the pipeline hostage in exchange for millions of dollars in ransom, which was paid. Then, in a surprise twist, the FBI announced that it had seized 63.7 bitcoins, worth about $2.3 million at the time, from a bitcoin wallet belonging to the cybercriminals.
While the feat was good news for the company and law enforcement, it triggered a sell-off of most cryptocurrencies because the assets are supposed to be so secure that they are out of reach of government seizures.
The Justice Department said it was able to get possession of the wallet’s “private key,” a feat that caused anxiety from some investors who fear that it could portend future government oversight. Sacco said the operation took away some of the “illicit appeal” of cryptocurrencies for those that use the assets to move money around.
China has also made headlines for its strict crackdown on Bitcoin.
To mine for bitcoin, high-powered computers are used to create rigs that verify virtual coin transactions, and many of those rigs are located in China. Last month, prices dropped when Chinese Vice Premier Liu He called for the “crackdown on bitcoin mining and trading behavior and resolutely prevent the transmission of individual risks to the social field.” Then, on Monday, China's central bank said it had asked banks and payment institutions to crack down harder on cryptocurrency trading.
“The fact that China is cracking down on mining, possession, ownership, and transacting of cryptos — that’s just a big chunk of demand coming from that part of the world that now is going to have roadblocks that are put up in front of it,” Sacco said.
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He said that in the short and medium terms, both the FBI ransom recovery and the increased Chinese regulations have lowered prices. But he added that he is still fairly bullish on digital assets in the long term.
Sacco said that because the governments “are as concerned as they are about crypto tells you something about where they see demand,” comparing the matter to prohibition: “When demand for something exists, there is truly nothing you can do to stop that.”
Sacco said that it was big deal when Bitcoin hit the $50,000 level because, at that point, the market value of the cryptocurrency eclipsed $1 trillion. He said that when it reached that price, it opened it up to a whole category of investors who won’t even look at investing until the market size is large enough to start examining.
While the price per bitcoin has been flagging, its usage has been becoming more mainstream. El Salvador’s President Nayib Bukele announced earlier this month that the country would become the first to adopt Bitcoin as legal tender.
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Analysts had been looking closely at the $30,000 mark as a key support level. Galaxy Digital CEO Mike Novogratz said the cryptocurrency could still rebound and that he isn’t particularly anxious about the drop.
“We’ll see if [$30,000] holds on the day. We might plunge below it for a while and close above it. If it’s really breached, $25,000 is the next big level of support,” Novogratz said on CNBC. “Listen, I’m less happy than I was at $60,000, but I’m not nervous.”
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