Last week in the news

Negative news from China made an impact on the crypto market during the previous week, which lost some of 10% of the value. Both Bitcoin and Ether went down to major support at $40K and  $2.8K, respectfully.

Previous week started with investors' concerns over potential negative impact of failure of Evergrande, China's biggest real estate company, with currently 1.300 real estate projects in 280 cities in China. The company also expanded within a field of car manufacturing, wealth management and food and beverage production. Its strong expansion was financed with more than $300 billion of borrowed funds. However, state control was imposed on this company during the last year, and the company went into trouble ensuring cash flows for payment of its obligations. This raised fears among investors that the scale of Evergrande`s business and debt is so high, that its default could impose serious issues even for China's financial system and potential credit crunch. There is also fear that many foreign investors might be affected, due financial markets in the U.S. started a week in the red, as well as the crypto market.

After news regarding Evergrande`s potential default was prices by financial markets around the world, the previous week was finished with another negative news related to crypto markets. Namely, People's Bank of China announced on Friday that all crypto-related activities are officially prohibited in China, including overseas businesses related to crypto. This move might be treated as the definitive end of any kind of crypto currencies businesses or transactions in China or with China`s business or individual entities. This also includes prohibition of any foreign company to offer any kind of services with crypto currencies to China`s residents. This news had a significant negative impact on the crypto market, especially major currencies like Bitcoin and Ethereum, which lost some of 6% and 10% within one day. Analysts are noting that this measure came as a response to forthcoming issuance of the digital yuan, where China's government is trying to curb any kind of competition to their new currency. Some lawyers are commenting on a possibility that China's government might propose to its residents, who own crypto assets, to exchange it for yuan at a fixed price. However, this is only one of the potential solutions, while PBOC did not make any comments if and how it will deal with this issue.

FED's meeting was another important event that triggered financial markets during the previous week. Major information from this meeting was that FED will continue with its near-zero interest rate policy, in which sense, interest rate hikes are not expected to happen at least till the end of this year. Inflation forecast for this year has been increased to the level of 4.2%, above previous estimate of 3.4%.  

Crypto market cap

China is shaking crypto market one more time this year. After it banned crypto mining, the latest move from the PBOC had made all crypto assets illegal in the country. Considering that there is significant number of people and businesses holding cryptos in the China, effect of this news was immediate sell-off of crypto holdings. During the previous week total crypto market capitalization fell one more time below $2 trillion to level of $1.91T, which is decrease of $267B or more than 12% on a weekly basis. Most affected were major currencies, Bitcoin, Ether and Binance Coin.  Daily trading volumes were modestly increased  to levels above $200B.  Total inflow from the beginning of this year stands at $1.11 trillion, which is an increase of 140%.

Due to negative fundamentals, almost all crypto currencies finished the previous week in the red. Bitcoin was leading a drop with a loss of $106B in market capitalization or 11%. Ether lost almost 17% in value, or $67B, followed by Binance Coin with a decrease of $10B or 15% in market cap. On the other side, Tether continues to increase the number of coins in circulation, as it gained in market cap some 0.38%. OMG Network was another coin which was not hit by market fundamentals, as the coin finished the week with a 1.65% surplus in market cap.

The table below provides most recent information regarding market cap and circulating supply for most popular crypto currencies.

Crypto futures market

During the previous week crypto futures were traded at lower prices. Bitcoin futures finished the previous week dropping 8% for maturities till November, while January 2022 was traded even 12% lower. Futures prices for the end of year 2022 were decreased at lower peace, by 6%. Ether futures with shorter maturities were down by some 12%, while maturities in January 2022 had the largest drop of more than 18% on a weekly basis.

Table below provides the most recent information on BTC and ETH future prices.

Bitcoin: fundamentals are holding the recovery?

At the beginning of the previous week Bitcoin was hit by the news regarding Evergrande`s potential default in China. BTC price went down from $48K to $42K. As soon as the market calmed down, another news hit the market as PBOC`s announced ban of crypto assets. It has pushed BTC`s price further down to $40K. Lowest price reached during the week was $39.5K, but market soon modestly recovered to the level of $45K. Coin is currently traded at level slightly above $42K. RSI went down to 35, indicating that clear oversold market might soon come. Two weeks before, oscillators made a golden cross, however, there is still missing confirmation from other indicators on potential move to the upside.

As per current charts there is strong support at $40K level. However, during this period of time fundamentals might play an important role in defining the short term price of the BTC, and other major coins. Namely, as PBOC`s news on crypto ban in China was announced on Friday, there is an increased probability that businesses and individuals will soon start to close their positions in order to align with new regulation, which might further drive volatility of BTC`s price. A level of investors precaution during the next week will be advisable, until the market fully digests the latest information.

Technical indicators are showing that there is probability for the current support line at $40K to be tested once again. Although there is no indication that this line will be breached at this moment, it should be taken into account that fundamentals will lead the price in the coming days. In case that price goes further on the down side, BTC will head toward $37K, before the final support line at $35K. However, it should be taken with reserve. Currently there is a higher probability that BTC will also move to the upside to test the resistance line at $45K. Whether the coin will have strength to go beyond this level during the next couple of days will depend exclusively on strong demand.

Ether: still not in the oversold area?

During the previous week the price of Ether was pushed to downside, breaking the level of $3K, where ETH was moving since the beginning of August. The lowest level that ETH reached was $2.630. Although the coin made a small reversal up to the level of $3.100, still, it ended the week below $3K. ETH found support at MA200 line. Oscillators continued their divergence from each other, while RSI moved close, but still not in the oversold zone.

Although the support line at $2.630 was touched only on one occasion during previous few days, a pressure on the downside still holds. This increases the probability for support line to be tested in the coming period. Currently in the spot of the market is the next support line at $2.850 which is currently tested. In case that it is clearly broken in the next few days, it will lead ETH to $2.630 once again. Same as with BTC, ETH`s price is currently sensitive to fundamentals, hence, it might be expected that market demand in the next couple of days will drive the price. In case that coin recovers from the latest selloff a level of $3K will be one to watch.

Ripple: can long term support resist pressure?    

Although Ripple was holding strongly to support at MA50 line, during the previous week it managed to break it and move all the way below MA200 line. Strong support at $1.0 was broken on the downside and the coin headed toward the next long term support at $0.9. Lowest level reached during the previous week was $0.85, where the coin last time was in August this year. RSI made a move toward 34, but still not moving in a clear oversold territory. Oscillators are continuing to diverge from each other. On a positive side, daily trading volumes were modestly increased during the whole previous week, which provides some indication that there is still market interest for this coin.

XRP is currently trading modestly above $0.9 long term support, as the market has tested this level during the whole previous week. The fact that it managed to hold above, increases the probability of XRP`s reversal to the upside. In this sense, the level to watch would be the $1.0 resistance line. However, in case that $0.9 support breaks on the downside, then it might be expected that XRP will search for new support shortly at $0.8 on its way to $0.7 support.

Binance Coin: strong pressure on $350 support

Slowdown of Binance Coin continued also during the previous week. In line with general market developments, BNB entered into reversal, down to the support level of $350. Lowest level reached during the week was $331. RSI is still holding modestly above 30, which is still not a clear oversold zone, but indicates that it soon might be the one. During the previous week BNB found resistance at the MA200 line. For the last two weeks oscillators are moving parallel to each other.

Strong pressure on $350 support continues, as coin is currently testing this level. This is also a level to watch during the next few days. In case that market continues to pressure the price on downside, then it might be expected that BNB will continue its path down to the next support line at $300. Level of $250 is marked as the end of the cycle, but it is still a long way to this level. In case that $350 holds, then BNB will revert to the upside in order to test support at $380, with quite low probability for next resistance at $430.

Cardano (ADA):  are charts too optimistic?

Although Cardano started a week following general market trend, it seems that this coin is resistant to major fundamental news, as it has swiftly recovered from short term correction and continued its move to the upside. Charts are suggesting that the level of $2.0 was the end of the correction cycle, so ADA reverted to the upside, currently trading above $2.30 level. RSI moved from 30 up to 50, not providing any indication that some reversal is ahead. Oscillators are continuing their divergence from each other. Indeed, charts are looking quite optimistic at this moment, but is it really so?

During the previous week Cardano found major resistance at the MA50 line. Based on short historical data, the current resistance line stands at $2.30, which ADA is currently testing. In case that MA50 and resistance line are clearly broken, it might be expected that ADA will continue its uptrend move to the next short term resistance line at $2.60. However, if resistance holds, then the coin might revert again to the support line at $2.0 to test it once again.

LINK: forming a new channel?

LINK finally managed to break the $25-$30 channel during the previous week, moving the price down to the level of the next short term support line at $20. During the whole week $20-$25 lines were in focus, with coin currently trading around $24 level. RSI is still moving above the oversold zone, while oscillators are continuing to move toward each other, but they are still managing to hold the distance.

If LINK is trying to form a new channel at lower levels between $20 and $25, we will see in the coming days. Following technical analysis and current levels, the next support line, below $20 stands at $15, while next resistance, above current $25 stands at $30.

Disclaimer: This article provides exclusive views of the author. It does not in any sense represent a suggestion for trading.

This Market Analysis has been published by a staff writer at XBTFX.

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