Bitcoin has lost half its value since hitting an all-time high in October, and the cryptocurrency's tailspin could deepen if it falls convincingly through important levels it has been circling in recent days.
The losses have left bitcoin hovering near $60,000, what technical analysts consider a "psychological level" — a big round number that leads traders to pause before crossing. Falling through psychological levels can lead to intensified selling. But tests of such levels can also attract bargain hunters attempting to time the next upswing.
This is what happened in February, when bitcoin fell to $60,008.52. Buyers jumped in, producing what turned out to be a dead-cat bounce, a mild and temporary recovery from prolonged selling.
The significance of the $60,000 level will be enhanced by the support it provided in February and its proximity to the 200-week moving average, which is at $61,778. However, the failure of its recovery attempts in recent months will also bolster sentiment among bears convinced that $60,000 will eventually fall.
If bitcoin falls through there convincingly — trading below $60,000 for three days, for example, with lower lows and highs — traders are likely to start targeting the next psychological level, $50,000. That level coincides roughly with bitcoin's low for August 2024, around $49,445, according to data supplied by LSEG, bolstering its importance as a goal for sellers as well as a potential point of support.
To turn bitcoin sentiment positive, any attempt at recovery will need to surpass the 30-day moving average at $75,685 and the 200-day moving average at $78,840. Traders use moving averages to strip out price extremes and gain a clearer view of a trend. Bitcoin's last attempted recovery stopped at the 200-day moving average in May.
What the chart shows:
(Daily markets commentary from Reuters analysts on the signals financial charts are sending - and what they might mean.)
