Bitcoin prices have been trading sideways for the last few weeks, moving within a reasonably tight range as many investors wait to see what China’s regulatory environment will look like going forward.
The digital currency‘s price has primarily traded below $4,000 since September 14, according to the CoinDesk Bitcoin Price Index (BPI).
The currency has suffered this malaise after surging to more than $5,000 on September 2 and then promptly falling back from that level.
Investing in cryptocoins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.
Following this decline, Bitcoin prices, along with the price of many other digital currencies, pushed higher, but encountered some difficulty as the regulatory environment for these digital assets became increasingly uncertain.
Chinese authorities banned initial coin offerings (ICOs) on September 4, according to CoinDesk. This came after the nation’s government officials investigated the exchanges, as well as them permitting no-fee trading, earlier this year.
Later that month, China’s already complex regulatory situation took a new turn when the nation’s three largest exchanges announced that within the next few months, they would stop offering local trading, TechCrunch reported.
Wait And See
Now, many Bitcoin investors are adopting a “wait and see” approach to see what China does next, according to several analysts.
“People are looking for clarity from China,” said Arthur Hayes, co-founder and CEO of leveraged cryptocurrency exchange BitMEX. Traders are “evaluating” the effects that new restrictions will have on the markets, he added.
Lucas Geiger, founder and CEO of Wireline, offered similar input, stating that “the regulation issues are casting a shadow” that likely worries those who are on “on the fence” about getting involved with cryptocurrencies.
Ryan Rabaglia, head trader for Octagon Strategy, shed some light on how this “wait and see” situation was impacting markets, stating that traditional volume has fallen across the board.
These market observers may get the clarity they are looking for very soon, said Pawel Kuskowski, CEO & co-founder of Coinfirm, a blockchain and regulatory technology firm.
“There are obviously some valid concerns from the regulators,” he said, asserting that the industry is quickly learning the impact of these requirements.
“So I think soon we see more and more ‘traditional’ players coming to this market and they will be strictly compliant,” said Kuskowski. “This will push the price up.”
Tailwinds For Bitcoin
Kuskowski is certainly not the only market observer who has asserted that regulation could have a positive effect on digital currency prices.
Geiger, for example, spoke to the upward price movement that Bitcoin enjoyed earlier this year as Japan recognized the cryptocurrency as a legal payment method.
“In my opinion the bull run coincided with positive regulatory information in the spring coming from Japan,” a development that “brought new participants to the market.”
Geiger insisted that in recent months, digital currency prices have risen as investors have entered the market.
A Healthy Pause
While Bitcoin prices have been moving range-bound for the last few weeks, this period of relative calm has taken place after the digital asset enjoyed a meteoric rise, causing its price to surge more than 400% this year.
After such a sharp climb, moving within a modest range could simply represent a healthy pause, said analysts.
“Cryptos were probably a little ahead of themselves when BTC was trading toward $5,000,” said Sean Walsh, partner at Redwood City Ventures.
Tim Enneking, managing director of Crypto Asset Management, offered similar sentiment, stating that “it’s healthy to take a pause” after experiencing such sharp price increases.
What The Future Holds
Going forward, some analysts are very optimistic. Geiger has described the growth of the digital currency market as “structural,” emphasizing that many players have been getting involved, causing the market to grow rapidly.
Marshall Swatt, an entrepreneur who founded cryptocurrency exchange Coinsetter, which was acquired by Kraken, provided a bullish stance on these digital assets.
Even though China was at one point considered the center of Bitcoin, Swatt asserted that cryptocurrencies will continue to grow regardless of what the Asian nation opts to do.
One analyst, Kevin Zhou, had a more neutral stance on the matter.
“I think it’s a bit hard to say right now whether the bull market will resume or whether we are at an inflection point,” said Zhou, co-founder of cryptocurrency trading fund Galois Capital.
“We’ve been in a bull market all year and if we really hit an inflection point here, we could see a more sustained pullback in both severity and time.”