The price of Bitcoin (BTC) has declined by more than 3% in the past two days. The pullback of the dominant cryptocurrency comes amid growing regulatory pressure in China and Hong Kong.
Timeline of exchange FUD in the past month
On Oct. 16, top Bitcoin futures exchange OKEx suspended withdrawals after one of its private key holders was reportedly arrested.
A mere 17 days later, speculation emerged that Huobi, a Singapore-based exchange with an office in Hong Kong, might face regulatory pressure after data showed massive Bitcoin and Tether withdrawals on Nov. 2.
However, Huobi Global reaffirmed that the exchange is operating normally, and deposits and withdrawals are “operating as expected.”
Today, Reuters reported that Hong Kong regulators will propose all cryptocurrency exchanges be regulated and apply for a Securities and Futures Commission, or SFC, license as opposed to the previous opt-in approach, which many exchanges declined to do.
It comes a year after the Hong Kong government released rules for cryptocurrency exchanges. Ashley Alder, chief executive of the SFC, said on Nov. 3:
“This is a significant limitation, as under the current legislative framework if a platform operator is really determined to operate completely off the regulatory radar it can do so simply by ensuring that its traded crypto assets are not within the legal definition of a security.”
“We can declare Bitcoin’s honeymoon phase to be over”
Despite the subtle wording of the SFC’s statement, industry experts said it is essentially a declaration to end Bitcoin’s honeymoon phase. Leo Weese, the co-founder of the Bitcoin Association of Hong Kong, said:
“With rumors of more crypto exchange officials arrested in China and Hong Kong’s move to make trading illegal (aka licensed), we can declare Bitcoin’s honeymoon phase to be over. If you think Bitcoin will catch on, buy it now while you still can.”
Kelvin Koh, a partner at the Asia-based cryptocurrency investment firm Spartan Group, said the timing is not a coincidence. It comes after the pilot launch of China’s Digital Currency Electronic Payment system, which has already processed over four million transactions. He explained:
“The timing of the Chinese OTC and exchange crackdowns is no coincidence. The PRC government is sending a strong message about its stance on cryptocurrencies other than the DCEP.”
Where does BTC go next?
Bitcoin price has reacted with a minor price drop, falling from $14,100 at the month’s peak to below $13,500. Albeit the reaction has been minimal, a further drop could have negative implications for the short-term trend of BTC.
Technically, the short-term support of Bitcoin is at $13,300. Below it, there is the $12,900 support area and the $12,200 level, which is the five-day moving average on the monthly chart.
On Nov. 2, before the drop of Bitcoin occurred, full-time trader at the Amsterdam Stock Exchange Michael van de Poppe said the $12,700 to $12,900 range is a strong short-term support area. He said:
“Still trending upwards, but lacking strength by a bit here. Has to hold above $13,550–13,650 for support. If that’s holding, renewed tests of $14,000 on the horizon. Losing and I’ll target $12,700–12,900.”
So far, the response of Bitcoin to the regulatory crackdown rumors has been minor. If BTC can remain above $13,000 in the short term, the outlook would likely stay positive.