Significant adjustments from the suspension of trade in China

This month's BTC has been full of ups and downs.

From China’s ICO regulations, exchange suspensions, and remarks by the CEO of a U.S. bank, BTC fell sharply and briefly adjusted toward around 300,000 yen. However, at this level the value was quite cheap, and after regaining composure it has been hovering in the 440,000 yen range.

■ Downward trend from ICO regulation

This is the BTC/JPY daily chart as of September 21 (technical indicators are 5-day and 20-day moving averages).

On September 4, the People’s Bank of China expressed the view that “ICO and all related fundraising activities are illegal.” In response to the essentially ICO ban, BTC adjusted from around 524,000 yen to about 450,000 yen.

As for ICOs, about 90% were seen as scams, underscoring the need for careful rule-making to establish a new fundraising method using cryptocurrencies. However, the danger of ICO pointed out by Chinese authorities was more of a pretext; the real aim was likely to temporarily exclude cryptocurrencies to avoid capital outflows that would invite a weaker yuan.

Of course, with only this material, the adjustment remained technical, but on the 12th when Jamie Dimon (CEO of JPMorgan Chase) stated that “Bitcoin is a fraud,” BTC moved further down, approaching 400,000 yen. JPMorgan has also been involved in blockchain development and reportedly held Bitcoin, so the market shock was significant, and there were moments of panic selling. However, since there was support around the 400,000 yen tier, it seemed the decline had temporarily stabilized.

Then on the 14th, major Chinese exchange BTCC abruptly announced a suspension of trading, sending the market into a frenzy from early morning. The line around 400,000 yen, which had retraced half of the gains since July, was finally breached, leading to unprecedented selling, with BTC briefly dipping into the 300,000 yen range.

■ Negative news impact was temporary

Some viewed the drop as a bubble burst, but it is unlikely that a trading halt in China alone would trigger a global cryptocurrency crash. If such a scenario were to occur, it would likely mean there were fundamental flaws discovered in BTC or blockchain systems. Going forward, the participation of institutional investors and other new players in the market is expected to rise, and reports noted early on that buy orders from hedge funds appeared during the quick rebound from the 300,000 yen level.

The ICO regulation’s impact is also expected to be limited. ICO fundraising schemes are still in a test phase, and price runs were driven by optimism rather than fundamentals. If successful cases emerge in the mid-to-long term, these schemes should be standardized based on those models, so even rapid surges should be followed by corrections, but remain a factor supporting medium- to long-term price increases.

■ Outlook for the second half of September

With no new material, a range bound of 400,000–480,000 yen is expected, but given the market’s tendency to react to news, caution is advised regarding any surprises.

Also, since many investors likely missed the surge from 300,000 yen, if prices exceed 480,000 yen there is a possibility of a rapid shift into an uptrend as buyers re-enter. However, since BTC may undergo a hard fork in November, market expectations for this are gradually being priced in, and selling pressure on the upside may increase once it rises, making further gains more restrained.

BTC is a high-risk investment. Investment decisions should be made at your own risk.

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【Author】

Nishio Kawada (Kawada Saio)

Trader Securities Market Division, Dealing Desk

Born in Geneva, Switzerland. Graduated from Keio University.

Eye-witness experience from traveling around the world gives a persuasive fanamentalist analysis rooted in real life.

Using behavioral economics learned in college, analyzes market participants’ psychological biases theoretically to apply to trading.

Hobby is shogi; as an amateur 3-dan, the midgame tactics are useful for reading the next move in the market.

My creed is “The masses are always wrong.”

【Disclaimer】

The Bitcoin market information and other contents provided on this site reflect the author’s personal opinions and do not guarantee the accuracy or safety of the content by the author, Trader Securities Co., Ltd., or our company. Also, such information is intended to provide reference and does not constitute endorsement of any specific investment actions or management methods regarding cryptocurrencies. Investors should make their own final decisions. Any gains or losses from investments belong to the investors. Trader Securities Co., Ltd. and the author assume no responsibility for any damages incurred based on this information.

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