Hong Kong will open crypto trading to retail investors, Bitcoin's weak rebound may be difficult to sustain

The crypto market reacted positively after the Hong Kong securities regulator announced that it expects retail investors to be able to trade mainstream cryptocurrencies such as BTC and ETH from June 1. Bitpush terminal data showed that Bitcoin rose more than 2% to $27,500 in the Asian session, and Ethereum rose nearly 2% to $1,851.91. As of press time, the crypto market has returned to calm, with Bitcoin returning to trading around $27,200, up 1% in 24 hours, and Ethereum remaining at $1,850, fluctuating narrowly within a 2% range.

Rebuilding a Fintech Hub

Hong Kong is trying to rebuild its image as a fintech hub, including through its pursuit of Web3, and the new move is a significant development as the move to allow retail investors to trade cryptocurrencies could spur increased liquidity and market activity.

Some industry insiders believe that the new regulatory regime will spur a new wave of crypto innovation. In 2021, mainland China banned all forms of crypto trading, and web3 entrepreneurs fled to more web3-friendly jurisdictions such as Singapore. As Hong Kong extends a welcoming hand to digital assets, many founders are weighing the option of setting up companies in Hong Kong. Western companies also see Hong Kong as a potential outpost for their Asian expansion.

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

But some industry insiders are hesitant about Hong Kong's open policy. They believe that as Asia's financial center, Hong Kong has historically not had a vibrant technology ecosystem and that the costs are too high for most start-ups. The types of crypto businesses that Hong Kong attracts may be those that serve and connect with traditional finance.

Noelle Acheson , an economist and author of the “Crypto is Macro Now” newsletter, said in her blog that Hong Kong’s decision to give the green light to retail investors does not mean that demand for cryptocurrencies will emerge in large numbers, as local traders may have already entered the market through offshore venues. “This news does not mean that a large amount of retail buying power will enter the market in early June… However, we may see an increase in trading volumes in June,” Acheson noted.

Oppenheimer analyst Owen Lau called Hong Kong's attempt to become a cryptocurrency hub "very aggressive." The analyst said: "It will continue to attract social attention and attract more companies to set up offices in Hong Kong. It is difficult to measure the exact impact, but it has a long-term impact on capital flows and talent flows."

Will it stimulate Bitcoin to continue to rise?

Whether Bitcoin will continue to rise depends on a number 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 the market currently lacks major news stimulus, regulatory issues and macroeconomic uncertainties, including the ongoing US debt ceiling deadlock, which have caused panic among investors.

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

“As long as the price remains below the neckline [horizontal trendline] of this [H&S] pattern and the 20-day moving average, we forecast further declines to $25,250 and possibly $24,000,” the analysts said.

In terms of longer-term forecasts, crypto analyst Inmortal has proposed several possibilities for the price of Bitcoin in the next one to two years. One scenario (60-70% probability) is that Bitcoin may range-bound before falling, with prices fluctuating in the $20,000-30,000 range, and the rise will begin in the fourth quarter of 2023. The analyst predicts that it will break through the $30,000 level and head towards $48,000 during this period.

In the second scenario (50% probability), Inmortal said that it is not ruled out that BTC will 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" pattern (30% probability - 40% probability), with a decline after a local top breakout, possibly breaking through $30,000 by the end of 2023 or the beginning of 2024. In this case, the next break through $30,000 may occur at the end of 2023 and the beginning of 2024, and may become the starting point for further increases.

With a week left in May, Bitcoin and Ethereum are on track to close out their worst monthly performances since the beginning of the year, down 7.6% and 3.1% respectively on a month-to-date basis.