Today’s small gain in the dollar or the fall in the pound following the publication of U.K. inflation data was nothing compared to the sell-off in cryptocurrencies. Bitcoin was down some 15% while Ripple had shed 30% at one stage.
Cryptos have been held back in recent days amid increasing levels of scrutiny from regulators, most notably in South Korea, where the government is planning to clamp down on trading in virtual currencies. The Justice Ministry is apparently working on a bill to ban cryptocurrency trading through exchanges. If the bill is eventually passed by the National Assembly it would be very bad news given that South Korea is the world’s third-largest market for cryptocurrencies. The uncertainty is weighing on investor sentiment. However, suggestions that this is the start of the demise of cryptos is very premature.
This uncertainty is reflected in price action, with Bitcoin trading near the lower end of its wide range. The key support that needs to hold on a closing basis is at 11,400, a level which previously support and resistance. If the Bitcoin/U.S. dollar (BTC/USD) currency pair breaks below this level then it could very easily drop to the next psychologically-important level of $10,000 next. Below that, the next support comes in at 8,350, which was previously a resistance level.
Meanwhile, resistance comes in at 12,800, last week’s low, followed by 13,430, the low of the doji candle from Monday. If these levels break then Bitcoin will likely go above this week’s opening price level of 13,648, which, if realized, would be a bullish outcome, particularly if the most recent swing high at 13,495 is also taken out.