Bitcoin is now below a key line on the charts signalling even greater loses may be on the cards.

The news that the Indian government may be banning the trading of Bitcoin and other virtual currencies is the latest blow to the virtual currency cryptoverse, which is seeing deep sell-offs in all major cryptocurrencies, and which has witnessed Bitcoin fall 13.1% overnight to a market price of $8,845.

The latest fall comes after the Indian Finance Minister Arun Jaitley said that the government would be working to eliminate the use of virtual currencies "in financing illegitimate activities or as part of the payment system." The comments were made as he delivered his budget statement for the next financial year.

"The wheels are coming off the bitcoin bandwagon. Bitcoin is currently trading below $8,400 having come under further pressure yesterday evening that has continued this morning. The regulatory crunch appears closer than ever and sooner or later this market could be headed back down to earth. Selling pressure at the moment is intense as there has been nothing but bad news for bitcoin bulls of late," says Neil Wilson, an analyst with ETX Capital.

Commentators are debating whether Jaitley meant a total ban of cryptocurrencies in India or just a crackdown on virtual fraud.

He said that the "government does not consider crypto-currencies legal tender or coin and will take all measures to eliminate use of these crypto-assets in financing illegitimate activities or as part of the payment system."

Separately, the ruling party tweeted a statement that said there is "no place for bitcoin in the formal economy of demonetized India," according to a report on Investopedia.

The statement comes after Facebook banned advertising of cryptocurrencies on its platform after they were found to be supporting criminal activities.

News that South Korea was banning the use of Bitcoin also led to cryptos losing ground recently.

Bitcoin fell below the key $10,000 level on Thursday and now appears to be close to establishing a new downtrend.

However, analysts remain resiliently upbeat about the currency's longer-term prospects, arguing buyers may be about to pounce on the decline as a 'second chance' entry point to get long.

"With prices falling, would-be buyers are probably waiting on the side-lines until the downtrend is over, while existing buyers may be withdrawing to avoid giving back any remaining profit they may have accumulated. But all that could change very quickly once there’s clear evidence prices have bottomed out, as I am sure there are still a lot of people wanting to get on board when the time is right," said Forex.com market analyst Fawad Razaqzada.

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Rising interest rates and the possibility of a comeback for the Dollar if Friday's jobs report is strong, are further weighing on the prospects of Bitcoin as it is not an interest-bearing asset (like Gold) so tends to do badly during periods when investors can benefit from high-interest rates, adds Razaqzada.

The recent high at $11,990 is the "bull-bear line" above which the crypto would have to rally to confirm a resumption of its uptrend, says the analyst.

To the downside, the next target is the 8180-8310 range,  "which is where an old resistance level meets the 127.2% Fibonacci extension level of the most recent price swing," says the Forex.com analyst. 

Then, "7775/80 – the 200-day moving average and finally 6550-6855 range – old resistance and 161.8% Fibonacci extension level of the most recent price swing converge here," says Razaqzada.

Fibonacci extensions are based on the 'golden mean' a mathematical ratio used to explain proportions in nature which has been adopted and applied by analysts to explain the length of moves in financial market valuations.

Our own view is that since breaking below the $9220.00 January 17 low the crypto has entered a much more bearish phase.

This is because $9220.00 marks the low of the C-wave of an ABC correction (see chart below), and if it remains intact the move down from the $20,000 highs is possibly only a correction, whereas if prices go below it then there is a stronger probability that they have started a new longer-term downtrend.