Bitcoin price has imploded this year even as Donald Trump sounded optimistic that the US would create a Strategic Bitcoin Reserve that will lead to higher demand. Bitcoin is now in its third consecutive week in the red, hovering near its lowest level since November 4.
Will the US Strategic Bitcoin Reserve Push China To Do the Same?
One of Bitcoin’s top drivers has been Donald Trump’s embrace of the industry. Last week, he announced that the US would create the Strategic Bitcoin Reserve, the digital equivalent of its gold holdings.
Trump signed an executive order to create reserves last week. Initially, the fund will be made of the seized Bitcoins, with the US expected to buy more in the future. The challenge is that any spending must be approved by Congress, which won’t be easy. Data shows that the US holds 198,100 coins valued at over $15.7 billion.
The formation of US strategic reserves means that China may do the same for two reasons. First, Beijing holds 190,000 Bitcoins worth over $15 billion. As such, it will be easy for Beijing to convert these holdings into reserves.
Second, China and the US are fierce competitors, with the former aiming to dethrone the US as the biggest economy in the world. China has achieved this success partly by emulating US activities. For example, the country has been accumulating gold in the past few years, bringing its total reserves to over 2,300 tonnes.
China hopes to keep buying gold to diversify from the US dollar. The urgency of this diversification increased after Washington announced tariffs against Russia’s central bank following its invasion of Ukraine. As such, China may seek to diversify its asset holdings by adding Bitcoin to its portfolio.
The challenge, however, is that China continues to ban cryptocurrencies, meaning that Beijing would need to change laws.
Bitcoin Price Analysis
The weekly chart shows that the BTC price has crashed over the past few weeks. On Monday, it moved to a low of $76,900, its lowest level since November last year.
Bitcoin has dropped below the key support at $87,250, the 23.6% Fibonacci retracement level.
It also moved below the key support at $89,220, with $108,330 as a reference for the neckline of the double-top chart pattern.
Bitcoin is now hovering slightly above the 50-week Exponential Moving Average (EMA), which is positive.
Therefore, the most likely scenario is that the coin will drop to retest the key support at $73,750, the highest point in March 2024, and then bounce back. This price action is known as a break-and-retest pattern and is one of the most bullish signs in the market.
A drop below that support will bring the next key level, $68,987, the upper side of the cup and handle pattern, into view.
If Bitcoin’s price crashes below that support at $68,987, more declines will be confirmed. This move could bring the price down to the 50% retracement level at $62,000.
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