Bitcoin plunged over the weekend but is finding its footing. Is the selloff complete?
Bitcoin, ethereum and all sorts of cryptocurrencies have been the talk of Wall Street. And given their performance, it’s no wonder that’s what we’re discussing.
Billions are being made and lost — mostly the latter — as the swoons in crypto pile on the pain.
That’s for billionaire investors and companies alike — and even some countries. Firms like Tesla (TSLA) – Get Tesla Inc. Report, Block (SQ) – Get Block Inc. Class A Report, Microstrategy (MSTR) – Get MicroStrategy Incorporated Report and others have built large positions in bitcoin.
U.S. investors may have had a long three-day holiday weekend in regard the stock market, but in the crypto world, it was business as usual — and business didn’t go very well.
Bitcoin prices plunged on Saturday, falling 13% at one point as it cracked below $18,000.
The bulls shouldn’t have been caught up in this move, as bitcoin was clinging to vital support just two weeks ago. Once that support level gave out, traders could have avoided a lot of pain by using discipline and knowing the key levels.
With bitcoin regaining the $20,000 level, what do the charts say now?
Has Bitcoin Bottomed?
Daily chart of bitcoin.
Chart courtesy of TrendSpider.com
Above is the daily chart, which highlights what happened once the key ~$30,000 level and uptrend support (blue line) failed.
It was a relatively cut-and-dried setup that opened up a massive air pocket down to the $19,500 to $22,000 area. That zone becomes evident on the weekly chart below.
Not only is this zone where the 200-week moving average was resting, but it marked the prior all-time high in 2017 and the major breakout level in 2020.
The bulls may sometimes forget that bitcoin fell more than 83% from its prior peak and that it traded at a low of $3,850 during the covid-19 selloff in March 2020.
Weekly chart of bitcoin.
Chart courtesy of TrendSpider.com
In that sense, the bulls need to let go of the idea that “bitcoin can’t fall anymore.” From the high, we’ve seen a 75% decline. That said, after such a big move and given the clear levels of support nearby, the charts finally show a reasonable setup.
Ideally, bitcoin will hold above $19,500. Conservative bulls who want to be long can use this level as their stop-loss, since a move below it thrusts bitcoin back below the prior breakout area, as well as below this week’s low.
More aggressive longs can use a stop-loss down at $17,500 — which if triggered would send bitcoin to new 52-week lows.
On a rebound, traders must first see if bitcoin can reclaim the 10-day moving average, which for now is active resistance. Above that puts $22,500 to $23,000 in play, which was resistance last week.
That’s followed by $25,000 and the 21-day moving average, then a potential rebound back to the $28,000 to $30,000 zone, which was strong support until this month.
As complex as our emotions can become when we are trading, the technicals simplify matters. Just move from level to level.
