While US-based investors continue to wait for regulatory clarity from Gary Gensler and the SEC, China has once again made a major announcement regarding the country’s crackdown on cryptocurrencies. This time the Central Bank of China released a public statement declaring all cryptocurrency-related transactions illegal, and outlawed foreign exchanges from serving Chinese citizens…
This is the 3rd time that China has ‘banned’ cryptocurrencies in 2021 alone, with the previous 2 announcements banning cryptocurrency exchanges in May, and a ban on cryptocurrency mining in June.
Without speculating on any geopolitical or economic agendas, it is clear that the main motivation behind the Chinese governments’ crypto bans is to make it clear to their citizens and the world that China will be using their Central Bank Digital Currency (CBDC) and nothing else.
Areas to focus on from this week...
Biggest Winners: Tezos (XTZ) +6.7% last 7-days, Avalanche (AVAX) +11.64% last 7-days and now #11 cryptocurrency by market cap, Cosmos (ATOM) +17.67% last 7-days
Biggest Losers: Bitcoin (BTC) and Ethereum (ETH) down over 11% over the last 7-days, Shiba Inu (SHIB) down over 14% over the last 7-days despite being listed on Coinbase exchange
What to watch: BTC psychological support level at $40,000, Solana (SOL) may test 50 day moving average (DMA), ETH support at 200-DMA
Ethereum’s price dropped disproportionately lower than Bitcoin over the last 7 days (-15.75% vs -11.30%), likely as a result of the psychological $3,000 support level being lost mid-week. ETH saw oversold conditions in both price and Real Motion on Tuesday as the coin found support at its 200-DMA, but is looking to be oversold once again today.
ETH went below the lower Bollinger band on both price and RealMotion at the beginning of the week, making it oversold. After testing the 200-DMA Ethereum bounced back with a +11.31% 1-day recovery as it underwent mean reversion.
Yesterday afternoon It appeared that ETH would test resistance at its 10-DMA and then 50-DMA, however, the overnight news of China’s new crypto crackdown has the coin back below $3,000. Keep an eye out for ETH to regain the $3,000 - $3,325 August trading range over the weekend once the China FUD (Fear, Uncertainty, Doubt) is no longer shocking the market.
While Ethereum has struggled this week, other Layer-1 decentralized finance (DeFi) platforms like Avalanche (AVAX) and Tezos (XTZ) thrived. Using RealMotion we can see that both AVAX and XTZ became overbought towards the end of August.
AVAX dipped and consolidated at lower levels after being overbought, but has retained a relatively stable momentum since, which explains why the coin continues to hit new all-time highs.
On the other hand, when XTZ became overbought in August it saw a slight dip before consolidating for about half the time that AVAX did before surging to new local highs. Today XTZ is the highest trending coin but may run out of steam again very soon as it re-approaches overbought levels on RealMotion.
Between the two, Avalanche looks to have stronger momentum and more consistent price action than Tezos. If you are considering investing in DeFi but would like to diversify outside of Ethereum (ETH), Solana (SOL), Polkadot (DOT), and Cardano (ADA), Avalanche may be worth watching.