Throughout the previous week, the entire market has been fairly volatile, but one occurrence sticks out above the others. In less than three hours, the Bitcoin price dropped by as much as 10% to $40,983. The market capitalization of cryptocurrency markets has dropped from $2 trillion to $1.8 trillion.
China’s central bank declared all cryptocurrency transactions illegal, thus outlawing digital tokens like Bitcoin. The markets are recovering as of this writing.
Against the heavy trading volume, Bitcoin (BTC) has found resistance around roughly $40,700. The most likely price action in this instance is sideways trading in the $41,000-$44,500 region. The prohibition on Bitcoin in China has put traders in a state of anxiety.
After China’s ‘crypto prohibition’ declaration led to a BTC price drop to $40,600, Bitcoin derivatives markets shifted from neutral to bearish. If bitcoin confirms $47.5k-$48k as resistance, the bearish break will be confirmed. To turn this around, the bulls must regain and hold above $48k.
BTC supply will not meet demand?
Since April, approximately 2,000,000 BTC has transferred from short-term to long-term holders, according to the firm’s most recent data. The data plainly demonstrates that “supply will not be able to match demand,” according to Glassnode’s Rafael Schultze-Kraft.
William Clemente, a cryptocurrency analyst, is also looking at new data on Bitcoin’s supply. According to him, BTC’s supply crunch ratio, which measures how much Bitcoin is held by strong versus weak hands, is exhibiting a bullish divergence.
Clemente points out that the present amount of on-chain activity is comparable to what occurred in June and July, just before the largest digital asset by market capitalization experienced a rise in August.