Bitcoin is down for the sixth consecutive day, this time because traders have started to question whether it will level out above $30,000. While there are still many people who believe bitcoin will continue to grow, there are also those who believe it will continue lower. As a result, traders have forced themselves into thinking about what the next line in the sand would be as they try to figure out where they should make their stops on bitcoin’s downward trajectory
With bitcoin’s plummet, it has broken through almost all of its technical support levels, forcing traders to consider $30,000 the next line in the sand.
The token was trading at $32,970 on Monday, its lowest price since July, and is now 50% below its November peak.
Based on its Relative Strength Index score of 19, the coin is oversold for the first time since March of 2020. Bitcoin has now approached the support region of $30,000, where some analysts see it finding a near-term floor.
When the RSI is above 70, an asset is considered overbought. When it is below 30, it is considered oversold.
“A 50% drop down is not as significant as what we have seen in the past, but it is significant now. As such, it is more concerning,” said Simon Peters, markets analyst at eToro. “The real support level seems to be around $30,000. That is where we tested back in May after the Chinese ban on Bitcoin mining.”
Managing director of Securitize Capital, Wilfred Daye, says $30,000 is psychologically important for Bitcoin, so there should be some support there. If the selloff continues beyond that to $27,000, he contends, “miners who got in at the beginning of the bull market will be in trouble.
In recent days, cryptocurrency has been under widespread selling pressure, with traders citing hawkish signals from the Federal Reserve as a reason to pull out of risky assets, including high-valued tech stocks.
Given cryptography’s volatility, traders often look to technical analysis for guidance. And just to give you an idea of just how precipitous the decline has been, consider that traders were looking for support at $40,000 less than two weeks ago. At the moment, Bitcoin is trading roughly 15% below that level. Other cryptocurrencies are also losing value, with Ether trading at $2,240, a significant drop from the $4,860 high reached in November.
During the dovish Fed era, cryptocurrency market capitalizations became hugely inflated, which priced in a tremendous amount of growth. The tightening path the Fed is on is removing liquidity from the system and readjusting outlandish valuations, shared Avi Felman, a portfolio manager at BlockTower.
According to Bloomberg data, the 40-day correlation coefficient between Bitcoin and the tech-heavy Nasdaq 100 index reached almost 0.66, the highest since 2010. There is a similar correlation between Bitcoin and the S&P 500 index as well.
Advice From Crypto Experts
The selloff is largely caused by traditional markets entering a correction. The narrative around Bitcoin being a non-correlated asset doesn’t hold up, and the notion that it has achieved safe haven status seems a bit naive. While this isn’t to say it won’t happen in the future, right now, Bitcoin is a risk asset and all other digital assets have historically gone in the same direction as Bitcoin.
Jon Venverloh, COO of Hypernet Labs, a cyber-infrastructure provider claims that The Federal Reserve’s interest rate policy, inflation, worldwide supply chain shortages, and ongoing global unrest are bringing adverse effects to markets of all kinds. Crypto does not escape widespread shifts in investor confidence, and this too shall pass.
Federal agencies will be tasked with assessing the risks and opportunities posed by digital assets as soon as the Biden administration releases an initial government-wide strategy, according to people familiar with the matter.
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Author
Chris Munch is a professional cryptocurrency and blockchain writer with a background in software businesses, and has been involved in marketing within the cryptocurrency space. With a passion for innovation, Chris brings a unique and insightful perspective to the world of crypto and blockchain. Chris has a deep understanding of the economic, psychological, marketing and financial forces that drive the crypto market, and has made a number of accurate calls of major shifts in market trends. He is constantly researching and studying the latest trends and technologies, ensuring that he is always up-to-date on the latest developments in the industry. Chris’ writing is characterized by his ability to explain complex concepts in a clear and concise manner, making it accessible to a wide audience of readers.
