When it rains, it pours. Last week, news began to hit the crypto community that China was taking harsh measures to reign in their various cryptocurrency exchanges. Several exchanges closed down and others were given a deadline to properly cease trading operations. This news came hard on the heels of recent directives that banned ICOs in China, leading to dramatic drops in cryptocurreny prices across the board.
After this latest news settled, bitcoin managed to slightly rally before topping out around $4100. However, early this week, rumors began to circulate that executives associated with Chinese exchanges are being prohibited from leaving China. At the time of this article, BTC-USD is sitting just at $3900 and is showing signs of further pullback:
Figure 1: BTC-USD, 12-Hour Candles, GDAX, Macro Fibonacci Retracement Values
The figure above shows the whole, macro bull run from the $1700s. One important feature of the trend shown above is the 61% retracement down to the $2900s. The retracement down to such a low value shows that sell pressure is very strong in the current market and hints toward bullish exhaustion within the macro trend. Another key feature to note is the following:
Figure 2: BTC-USD, 2-Hour Candles, GDAX, Failed 100% Retracement
An important test of this rally was the 100% retracement of the bear run, post-China news. Sitting just below the 23% Fibonacci Retracement lies the bear run. The test of the 100% retracement is important because that resistance line marks a strong shift in market sentiment. A failure to break through those values shows that, even though there was a strong rally, the market is still bearish in nature and is likely to continue.
Figure 2 also shows several tests and rejections of the 2-Hour 200 EMA (Exponential Moving Average). The 200 EMA is a common tool used among traders to objectively view the state of the market compared to the prior trends. A trend existing below ...