The current crypto prohibition in China, according to the analyst, is also optimistic for Bitcoin and the US dollar.
According to Mike McGlone, senior commodity strategist at Bloomberg Intelligence, Bitcoin (BTC) has a higher chance of recovering to $60,000 than breaking below its present support level of $30,000 to reach $20,000.
McGlone compares Bitcoin’s current price behavior to the “too-cold” period of the 2018–2019 trading session, according to a screenshot from his recent research supplied by Bloomberg senior ETF analyst Eric Balchunas.
Following an 80%+ meltdown in 2018, the BTC/USD exchange rate underwent a prolonged consolidation phase near $4,000, but a dramatic run-up in 2019 boosted its prices as high as $14,000 on certain exchanges.
McGlone, who has previously called Bitcoin bullish, believes that BTC, which has been consolidating near $30,000 since May, might stage a similar surprise rebound in order to reach a new resistance objective of $60,000.
“When Bitcoin maintains around a 30% threshold below its 20-week moving average, the more tactical-trading-oriented bears appear to proliferate, providing the buy-and-hold types time to consolidate,” the strategist noted.
The trio of moving averages
The 20-week exponential moving average (20-week EMA; green wave), which serves as interim support/resistance, the 50-week simple moving average (50-week SMA; blue wave), and the 200-week simple moving average appear to waver around three major moving average indications (20-week SMA; the orange wave).
Bitcoin prices usually stay above the three moving averages during bull markets. Meanwhile, as illustrated in the chart above, bearish tendencies see cryptocurrency values close below the 20-week EMA and the 50-week SMA.
In a bad market, the 200-week SMA is usually the last line of defense. Bitcoin has so far bottomed out twice at the orange wave, each time sending prices soaring. In 2018, for example, a breakout from the 200-week SMA boosted Bitcoin prices to about $14,000.
Similarly, during the COVID-19-led meltdown in March 2020, the wave support capped the cryptocurrency’s attempts to fall. Later, the price jumped from $3,858 to more than $65,000.
Since 2018, Bitcoin has already fallen below this trendline three times. The cryptocurrency has broken below the 20-week SMA (about $39,000) and is now aiming for support at the 50-week SMA (around $32,200). It should continue to decline toward the 200-week SMA (about $14,000) if the old fractal is reproduced.
McGlone, on the other hand, feels there could be an early rebound. The expert cited China’s recent crypto prohibition as a bullish fundamental.
Tether is the winner.
In May, Beijing announced a total ban on cryptocurrency transactions. The ruling stymied the country’s mining operations, forcing them to shut down or relocate their operations outside the country. As a result, bitcoin values plummeted.
Nonetheless, McGlone sees China’s rejection of open-source software crypto assets as a stumbling block in the country’s economic development. The analyst linked an index to a tweet on Friday that showed soaring volumes and capitalization of U.S. dollar-backed digital assets, including Tether (USDT).
He then contrasted increased demand for digitized dollars with rising Chinese yuan-to-dollar exchange rates, indicating that between 2018 and 2020, the logarithmic scale of market capitalization swings between the two fiat currencies was below zero. This indicates that the yuan was losing value against the dollar.
The scale has just risen over zero, indicating that the yuan is gaining ground against the dollar. Tether, whose market worth increased by more than 40% over the baseline, appeared to be dwarfing its upswing. According to McGlone,
“While extolling the worth of the US dollar and Bitcoin, we feel China’s rejection of open-source software crypto-assets may indicate a plateau in the country’s economic growth.”
Additionally, while the US government has not officially launched a central bank-backed digital dollar like China, the availability of many other alternatives — such as Tether, USD Coin (USDC), and Binance USD (BUSD) — could pose a challenge to the Chinese-controlled digital yuan, according to Petr Kozyakov, co-founder and CEO of global payment network Mercuryo.
“These cryptocurrencies are pegged 1:1 to the US dollar, and the dollar is driving the digital growth over the Chinese Yuan, as seen in the chart McGlone gave,” Kozyakov added.
“While China’s crackdown has impacted Bitcoin’s price, which is now hovering around $30K on June 23rd, fundamentals have greatly improved since 2018 owing to institutional FOMO. […] By the end of the year, Bitcoin should have recovered to $50,000.”
The Chinese economy will continue to expand.
Yuriy Mazur of CEX.IO Broker, however, disagreed with McGlone’s assessment, stating that the Chinese economy will continue to thrive with or without cryptocurrencies, and that the desire for digital assets has nothing to do with it.
“The Chinese government is just too astute to pass up something that the rest of the world values,” Mazur told us.
“As a result, expect them to take significant steps in the future to put out a Yuan-backed cryptocurrency that they fully control.”