NEW YORK (TheStreet) -- Bitcoin has spent the entire month of April trading in a no mans land. After opening at $455 on April 1, BTC/USD first fell to a low of $342 only to later rally to a monthly high of $544.90.
Prices were unable to keep the upward momentum however and BTC quickly dropped below the important $500 mark. One bitcoin is currently going for $435.50 on BTC-E and $442 on BitStamp. This is less than 5% from the monthly open of $455.
How did we get here?
It's been a tough few months for the fledging cryptocurrency. The move up that began below the $200 mark all the way up to $1090 was largely underpinned by increased market adoption in China. After the communist establishment became increasingly hostile to bitcoin, the legs of the rally were cut off. The first ''ban'' was against using btc as a form of payment for goods and services. Next on the chopping block was access to the Chinese banking system. Add in some transaction malleability, the bankruptcy of the once dominant bitcoin exchange Mt. Gox, and it's not a surprise that we're currently trading over 50% below the $1,090 peak.
The latest move down started on rumors that the People's Bank of China has been sending out notices to Chinese banks, barring them from working with btc exchanges. Prices have been on a steady downward trajectory ever since, as more and more confirmation of the rumors came in.
Where are we going from here?
The range is set to continue until we brakeout above $500 or below $342. The medium-term trend, as indicated by the last few weeks of price action, is down. The long-term trend up is still intact unless we make a significant break below the important $266 level. The was the highest swing high in BTC/USD for most of 2013 until the November rally and is likely to be a significant support on the way down.
Important resistance levels on the upside include the psychological $500 barrier, followed by the recent swing high of $550. Further up, the March 25 swing high of $590 will provide some resistance. On the downside, the recent swing high at $342 may support prices. Below this, we have the round $300 number followed by the above mentioned $266. You can see the rest of the important levels on the chart below.
Market Adoption Continues
Despite the 60% fall in BTC prices in the last four months, market adoption, both on the customer and the merchant side, continues unabated. BlockChain.Info, a popular online bitcoin wallet service, recently passed the 1.5 million wallets mark. The number of bitcoin wallets doubled in the last four months despite the price decline.
Coupled with this, more and more merchants are offering bitcoin as a payment option. CoinMap.org, a directory of brick and mortar shops that accept btc, just passed the 4,000 mark. Naturally, merchant adoption is much higher for online businesses. BitPay, a bitcoin payment processor, announced that it surpassed 26,000 approved merchants on March 11. Six months ago this figure stood at 10,000.
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.