Bitcoin Swings Below Key Support as China Readies State-Backed Crypto Competitor
Bitcoin’s price was back under pressure pressure Tuesday, falling below the key $11,300 support after China’s central bank revealed it will soon launch its state-backed cryptocurrency. Although two events don’t appear to be related, the arrival of a state-backed digital asset is being touted as a rival to bitcoin’s dominance despite lacking many of the same characteristics.
The bitcoin price reached an intraday low of $11,099.98 on Bitstamp, where it was down 2.4%. At last check, BTC/USD wasn’t far from session lows, down 2.1% at $11,145.
Bitcoin has been under pressure since being rejected at $12,000 for the second time in the span of a month. The cryptocurrency is carving out a path of lower highs, which is normally viewed as bearish.
The Tuesday slide dragged bitcoin’s market cap below $200 billion for the first time in over a month. BTC still accounts for more than 68% of the overall cryptocurrency market.
Despite its recent struggles, bitcoin’s trading range has stabilized in recent weeks. The cryptocurrency’s 30-day volatility tracker is approaching the lowest level since late June, according to bitvol.info.
China Readies State-Backed Cryptocurrency
After five years of research, the People’s Bank of China (PBOC) has announced that it will soon introduce a state-backed cryptocurrency. The announcement was made by a senior PBOC official at the China Finance 40 Forum and confirmed by Reuters, Bloomberg and Forbes.
Mu Changchun, PBOC’s deputy director, said the asset would be based on a “two-tier” system that will allow the central bank and financial institutions to issue it. Little else is known about the cryptocurrency or when it will be released.
The Chinese government issued a ban on cryptocurrency trading and initial offerings (ICOs) during the height of the market mania back in September 2017. However, that hasn’t stopped the central bank from researching digital assets and pursuing dozens of patents tied to cryptocurrency and blockchain technology.
While cryptocurrencies can’t be traded on mainland exchanges, ownership of digital assets is protected by Chinese law, according to the latest ruling by the Hangzhou Internet Court. Last month, the court ruled that cryptocurrency should be classified as “virtual property” and protected as much. PBOC has since come out in favor of the ruling.
“Indeed, bitcoin is virtual property, but it’s not fiat money,” PBOC said, according to a local newspaper.
Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
Featured image courtesy of Shutterstock. Chart via TraingView.