Hong Kong to open cryptocurrency trading to retail investors, bitcoin rebound may be weak or unsustainable

Hong Kong to allow cryptocurrency trading for retail investors, but bitcoin's rebound may not last.

After Hong Kong’s securities regulator announced that retail investors would be able to trade mainstream cryptocurrencies such as BTC and ETH from June 1, the cryptocurrency market reacted positively. Data from the Blocking terminal showed that Bitcoin rose more than 2% to $27,500 during the Asian session, while Ethereum rose nearly 2% to $1,851.91. At the time of writing, the cryptocurrency market has returned to calm, with Bitcoin trading around $27,200, up 1% in 24 hours, and Ethereum holding at $1,850, fluctuating within a range of 2%.

Rebuilding the Fintech Center

Hong Kong is trying to rebuild its image as a fintech center, including pursuing Web3. The new move is a major step forward, as allowing retail investors to trade cryptocurrencies may stimulate liquidity and increase market activity.

Some industry insiders believe that the new regulatory regime will give rise to a new wave of cryptocurrency innovation. In 2021, a paper from mainland China banned all forms of cryptocurrency trading, and web3 entrepreneurs rushed to more web3-friendly jurisdictions such as Singapore. As Hong Kong extends a welcoming hand to digital assets, many founders are weighing the choice of setting up companies in Hong Kong. Western companies also see Hong Kong as a potential forward base for their expansion in Asia.

Blocking previously reported that Bart Stephens, founder and managing partner of Blockchain Capital, a San Francisco-based venture capital firm, said he is considering moving to several popular international crypto centers as U.S. authorities crack down on the industry. “Other jurisdictions such as the UK, UAE and Hong Kong are actively attracting American entrepreneurs and venture capital firms. Cryptocurrencies are a global industry, based on the concept of decentralization, so we are exploring decentralizing our financial and human capital,” Stephens said.

But some industry insiders are hesitant about Hong Kong’s open policy. They believe that as Asia’s financial center, Hong Kong has never had a vibrant tech ecosystem, and the cost is too high for most startups. The types of cryptocurrency businesses that Hong Kong attracts may be those that serve traditional finance and interface with traditional finance.

Economist and “Crypto is Macro Now” newsletter author Noelle Acheson said in her blog that Hong Kong’s decision to open the door to retail investors does not necessarily mean a surge in demand for cryptocurrencies, as local traders may already have entered the market through offshore venues. Acheson said, “This news doesn’t mean a flood of retail buying power will enter the market in early June … However, we may see an uptick in trading volumes in June.”

Oppenheimer analyst Owen Lau called Hong Kong’s bid to become a crypto hub “very aggressive.” The analyst said, “It will continue to attract social attention and more companies to set up offices in Hong Kong. It’s hard to measure the exact impact, but it has a long-term effect on capital and talent flows.”

Will it stimulate Bitcoin to continue to rise?

Whether Bitcoin will continue to rise depends on a series of factors, including regulatory changes, market sentiment, technological progress, macroeconomic trends, etc. Hong Kong’s new policy has been priced in by the market, and currently there is a lack of major news to stimulate the market. Regulatory issues and macroeconomic uncertainty, including the ongoing U.S. debt ceiling deadlock, have made investors panic.

According to Secure Digital Markets, a Canadian digital asset liquidity provider, Bitcoin needs to clear the Head and Shoulders (H&S) trendline resistance and the 20-day simple moving average of $27,500 to continue to gain upward momentum from a technical chart perspective.

Analysts said, “As long as the price stays below the neckline [horizontal trendline] of this [H&S] pattern and the 20-day moving average, we predict that it will further decline to $25,250, and may fall to $24,000.”

In the longer-term forecast, crypto analyst Inmortal has proposed various possibilities for Bitcoin prices over the next one to two years. One scenario (with a 60-70% probability) is that Bitcoin may oscillate within a range of $20,000-$30,000 before falling, with an uptrend beginning in Q4 2023. The analyst predicts that during this period, it will break through the $30,000 level and head towards $48,000.

In the second scenario (50% probability), Inmortal says that BTC may retest the $25,000 level after a long period of consolidation around $29,000, and then rise between the end of 2023 and the beginning of 2024.

The third scenario is a “roller coaster” shape (30% probability-40% probability), with a local top breakthrough followed by a decline, possibly breaking through $30,000 at the end of 2023 or the beginning of 2024. In this scenario, the next breakthrough of $30,000 may occur at the end of 2023 and the beginning of 2024, and may become the starting point for further upward movement.

With one week left until the end of May, Bitcoin and Ethereum may close with their worst monthly performance since the beginning of the year, with declines of 7.6% and 3.1%, respectively, since the beginning of the month.

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