The renewed selloff in major cryptocurrencies after China’s new ban is showing no signs of abating, with bitcoin foreshadowing more losses as traders and investors rush to lock in gains now before a potential selling spree.
China’s new ban which bars individuals from holding cryptocurrencies orders institutions, including banks and online payments channels not to offer clients any service involving cryptocurrency.
Previously in 2017 China closed down its local cryptocurrency exchanges to root out speculative betting that had then accounted for 90% of global trading in bitcoin.
As of press time, Bitcoin (BTC) is changing virtual hands at US $38,940, Ether (ETH) at US $2,890, ripple (XRP) at US $1.37, Binance Coin (BNB) US $409, cardano (ADA) at US $1.58, Dogecoin (DOGE) at US $0.38, ChainLink (Link) at US $36, UniSwap (UNI) at US $29, Polkadot (DOT) at US $35 and Stellar (XML) at US $0.55.
As reported earlier this morning, massive selloff volumes are still flowing as traders and investors with highly leveraged positions have been fleeing on the worry that declining prices amid the prevailing negative outlook will further pressure the downward reversal.
Persisting selloff on the back of prevailing downtrend may take bitcoin further down to $20,000 to $30,000 in the coming days.
Just a month ago in mid-April, cryptocurrency holders were fumed as a sudden constellation of risk events triggered the forced liquidation of leveraged bets, wave of selling with pressure across the board.
The flash crash made many investors cautious to buy into an ongoing crash, reducing bid liquidity in the market.
Many crypto exchanges allow traders to trade on a margin account (using leverage), which means that they can use a relatively small amount of money upfront to borrow the rest in order to hold large amounts of digital assets.
Although the leverage magnifies profits if the price goes in the favorable direction (depending on short or long orders), it leaves traders in a much more vulnerable position if price goes in the wrong direction.
The actual downturn in the market takes its roots back to early May when President Joe Biden’s capital gains tax (CGT) hike hit the news, triggering cautious market sentiment which eventually let to high sell volumes.