Bitcoin is trailing as it starts a new week thanks to fresh worries over a blanket ban by India—is that it for the bull run?
After hitting new all-time highs of almost $62,000 over the weekend, Indian lawmakers have burst Bitcoin’s bubble, sparking the biggest daily losses in history.
As investors fight back and urge calm at what is ultimately a move completely separate from the Bitcoin network itself, the largest cryptocurrency is already recovering from local lows.
Modern Consensus takes a look at what the coming days might have in store for traders. We also publish a markets summary every Friday, the latest edition of which you may find here.
Market reacts to mixed messages on India Bitcoin plans
Monday extended what was already a comedown for Bitcoin, which ran out of momentum after passing $60,000 for the first time on Saturday and going on to reach $61,700.
After falling below that level to linger briefly around previous all-time highs of $58,300, a familiar source of fear, uncertainty and doubt (“FUD”) added fuel to the bearish fire in Bitcoin, which then fell to $54,550.
Despite recovering to press-time levels of $56,000, the $6,000 drop in just six hours was Bitcoin’s biggest on record on such short timeframes.
The reason, it appeared, was India, where lawmakers are primed to recommend a complete ban on cryptocurrencies.
According to Reuters, which referenced an unnamed official with “direct knowledge,” the government plans to introduce a new law which “would criminalize possession, issuance, mining, trading and transferring crypto-assets.”
Under a grace period, existing holders would have “up to six months to liquidate” their investments or face “penalties.”
The move is not unexpected given previous noises from the Modi administration, but promises a fresh round of problems for India’s cryptocurrency industry which has already weathered a ban from the country’s central bank.
As with any Bitcoin ban, it remains unknown how officials would enforce their demands given the decentralized nature of the network, beyond the control of any given entity.
Reacting, Bitcoin supporters were therefore as dismissive as ever of any idea that the total removal of Indians’ involvement in cryptocurrency could ever come to pass.
“Indians can easily (and should) ignore the government and keep stacking sats per their human rights,” RT host Max Keiser tweeted.
“India could be the first country Bitcoin dissolves. $220,000 in 2021 incoming.”
Others noted comments from finance minister Nira Sitharaman during a recent interview. In it, she did not mention a blanket ban.
“Whilst we are very clear that the Reserve Bank may take a call on an official or anything of that kind… from our side, we are very clear,” she said.
“We are not shutting all options off. We will allow… a window for people to use, so that experiments in blockchain, Bitcoin, whatever you want to call it—the cryptocurrency experiments and fintech, which depends on such experiments, will have that window available for them.”
Grayscale CEO: Buy the dip
In terms of short-term price forecasting, traders were keen on similarities between the current correction and that which occurred at the $58,300 highs.
As Modern Consensus reported, that level was followed by a retracement which at one point totalled 25%. The downturn was short lived, however, as from February 23 it took less than three weeks for BTC/USD to not only retake its record but post a new one.
“History doesn’t repeat itself, but it often rhymes,” Scott Melker summarized on the day.
Fellow trader Michaël van de Poppe nonetheless voiced caution, warning that a failure to secure $57,000 again would lead to Bitcoin embracing its previous trading corridor.
“Bitcoin barely holding on to this critical level here. Needed for upwards continuation, otherwise, price drops back into the range,” he told Twitter followers.
As mainstream media began to sound the alarm on the drawdown, however, some of Bitcoin’s biggest names had no problem calling out what can easily turn into an overly bearish narrative based solely on the fact that the price has gone lower.
“…We don’t call a 10% drop in the price of Bitcoin ‘a correction,’ we call it a buying opportunity,” Michael Sonnenshein, CEO of asset manager Grayscale, responded to CNBC host Joe Kernen’s latest comments on the network’s “Squawk Box” segment.
Wall Street traders’ reaction to the dip was yet to be confirmed at press time, half an hour before markets are due to open.