Bitcoin fell below its $7,000 support level to its lowest price since May 2019 with predictions that it could tumble further if it breaches the $6,500 level, a technical gauge by Bloomberg suggested.
Cryptocurrencies have been under pressure in recent months as China takes steps to crack down on the digital currency space.
China’s central bank, the People’s Bank of China, has been thinking about creating its own national digital currency to counter the possibilities and threats posed by the Facebook cryptocurrency – Libra.
Watchdogs in Shanghai issued notices in November calling for a cleanup of companies involved in cryptocurrency trading.
A support level refers to the price level that an asset such as Bitcoin does not fall below for a sustained period of time. It is created by buyers entering the market whenever the asset dips to a lower price, according to Investopedia.
Bitcoin reached the $6,500 level at the end of November, considered to be its next support line if the price falls below $7,000.
In the last days of 2019, Bitcoin showed uncharacteristic strength considering its performance during the year, surging to $7,520 on Dec. 29 but failing to break the $7,500 ceiling and retreating to around $7,300 when this article was published on Dec. 30.
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Analysts say this price action could be indicative of a bullish breakout for the digital unit that could see it reach the highs of $8,000 in the early part of 2020.
Others believe that the failure to break out of the $7,000 support is a precursor to a further drawdown.
Analyst Zoran Kole forecasts that Bitcoin is likely to burst past the $7,500 resistance due to the fact that liquidity has dried up in that range, setting the stage for a rally into a “new range.”