Key Takeaways

The People’s Bank of China has deemed all cryptocurrency trading activities illegal.
Bitcoin and Ethereum fell in tandem, losing more than 6% in market value.
If the bearish momentum accelerates, BTC could target $36,000 and ETH $2,400.

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Another Chinese cryptocurrency ban has hit the market hard, pushing Bitcoin and Ethereum toward critical support levels. Now, investors must remain vigilant as further selling pressure could lead to more considerable losses. 

PBOC Cracks Down on Crypto

The People’s Bank of China (PBOC) announced that it would be taking further measures to crack down on cryptocurrencies. 

In a public statement, the PBOC said that digital assets had disrupted economic and financial order, increasing illegal and criminal activities in the nation. To prevent further propagation of these risks, the Chinese central bank deemed all services enabling the exchange of fiat currencies and cryptocurrencies as illegal activities.

The new regulation targets any financial institution or trading platform that allows Chinese citizens and residents to convert yuan into cryptocurrencies. Additionally, individuals who engage in such activities and crypto derivatives trading would be subject to legal prosecution. 

PBOC’s recent remarks have shaken the entire cryptocurrency market. In particular, Bitcoin and Ethereum plummeted by more than 6%, losing most of their recent gains. Now, these digital assets stand on shaky ground and may be prone to further losses. 

Bitcoin and Ethereum On Thin Ice

From a technical perspective, it appears like the Tom DeMark (TD) Sequential indicator sensed that a steep retracement was underway. This technical index presented a sell signal in the form of a green nine candlestick on Bitcoin’s 4-hour chart, anticipating a one to four candlesticks correction. 

Now that the pullback is underway, only one support barrier might keep falling prices at bay. The 78.6% Fibonacci retracement level and the setup trendline are acting as an essential interest zone. These demand walls sit at $42,450 and $41,900.

Bitcoin must hold above this support area to continue to trend upwards. Failing to do so could accelerate the selling pressure behind it, pushing prices to $39,600 or even $36,000. 

Source: TradingView

The TD setup also turned bearish as Ethereum rose to $3,200. The PBOC’s statement might have helped validate the pessimistic outlook, pushing ETH back to $2,900. Now, the bulls must do everything in their power to prevent Ethereum from slicing through this support level.

Further selling pressure that breaks the $2,900 support can result in significant losses as the next critical interest areas are $2,650 and $2,400.  

Source: TradingView

Investors must pay close attention to the support levels that Bitcoin and Ethereum currently hold to determine where these cryptocurrencies are heading next. Although the market might have reacted quickly to PBOC’s statement, many Chinese investors might be forced to sell their holdings to avoid legal issues.  

This news was brought to you by Phemex, our preferred Derivatives Partner.

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