Investors are still generally cautious about putting funds back in bitcoin after all the goings-on in China. This is the largest bitcoin market in the world so anything that happens locally would have repercussions on global bitcoin activity. Earlier in the year, government authorities stepped up their efforts to curb bitcoin activity as part of their goal to reduce offshore investments and speculative yuan positioning.
This forced bitcoin to return a lot of its recent gains throughout January, although a rebound occurred when authorities seemed to ease up on their regulatory moves. However, bitcoin price tanked once more when a couple of major exchanges in the mainland were prompted to halt client withdrawals in compliance with ongoing investigations. This led traders to liquidate their holdings and be extra cautious when going long.
With that, liquidity has been significantly weighed down in the past few weeks so this low volatility environment could be the norm for bitcoin, unless any major industry updates pop up. So far, the industry has been showing positive developments in terms of bitcoin acceptance in the mainstream and on Wall Street. Aside from that, geopolitical risks in the West stemming from the Trump administration and the upcoming French elections are also keeping bitcoin supported. Foreseen financial troubles in Greece and Italy could also shore up demand for the cryptocurrency in the coming weeks.
On the flip side, factors that dampen bitcoin gains are that of Fed rate hike expectations for March which would boost dollar demand and anticipation for Trump’s tax reform plan which would encourage traders to put money in US assets instead. Of course there’s also the threat of Chinese regulation on bitcoin or penalties on clients that could further undo bitcoin gains.