Exchanges deplatforming Chinese citizens prior to the Dec. 31 deadline may have added to BTC selling pressure.
Bitcoin (BTC) bears lost out at the last minute as 2021 came to an end — and the consensus is building around China again being the reason for weakness.
China “last hammer” could now provide optimism on BTC
Hours before the yearly close, BTC/USD dived $2,000 to lows of $45,630 on Bitstamp before a modest recovery drew a line under 2021 at $47,200, data from Cointelegraph Markets Pro and TradingView shows.
While something of an anticlimax and far below many popular projections, the lack of parabolic upside for Bitcoin has recently seen explanations shift to exchanges.
Chinese users, following years of the government tightening the screws around crypto trading, had until Dec. 31 to leave the major Chinese exchanges, which were obliged to deregister them.
For Bobby Lee, former CEO of exchange BTCC, this constitutes the “last hammer” in Beijing’s arsenal and one which could have been having a considerable impact on selling behaviour.
“Maybe that’s why the hotly anticipated year-end bull market hasn’t taken off yet,” he argued in a series of tweets on the matter in early December.
“Waiting for the last hammer to drop in China! Expect a mini-correction when the enforcement news gets out, and then a relief rally that could bring us back on track for a real Bitcoin bull market.”
Other voices supported the theory, while this week, Blockstream also acknowledged the possible pressure from offloading Chinese users, who could be selling their BTC in order to withdraw capital — leading to rising balances.
It’s also a potential reason for optimism going forward as the Chinese exchange overhang will be cleared from the end of this month.
“I think this probably explains why we’ve seen Bitcoin typically trade weaker over Asia hours vs US and European hours,” Blockstream analyst Jesse Knutson wrote in the firm’s latest weekly newsletter.
“It’s also a potential reason for optimism going forward as the Chinese exchange overhang will be cleared from the end of this month.”
Staying cool on holiday volatility
On shorter timeframes, thin holiday liquidity could provide another reason to discard price dips like the one seen Friday.
Prior to the return of Wall Street and institutional traders, BTC price action overall may provide an unreliable impression of how the market will perform subsequently.
2022, one forecast this week said, should see a major “flipping” of Bitcoin ownership in favour of large-volume institutional traders and away from retail.