Bitcoin sell-off violates key support level and suggests additional downside of 13%, technical analyst says
Nurphoto
Bitcoin's 7% decline on Wednesday accelerated into a risk-off move after minutes released by the Federal Reserve suggested a more hawkish Fed that is eager to fight inflation with higher interest rates.
The sell-off in crypto violated a key support level, and another close below that price suggests more downside ahead, according to technical analyst Katie Stockton of Fairlead Strategies.
With bitcoin trading around $43,000 early Thursday, the cryptocurrency has a lot of ground to cover if it wants to get back above its key support level of $44,200, she said.
Consecutive closes below that mark would put bitcoin's next support level at $37,400 into play, representing potential downside of 13% from the latest price. But investors should hold off for now on making any moves, according to Stockton.
«Support levels are cushions, not precise points, so we would make sure breakdowns are confirmed on a consecutive closing basis before acting on them,» she explained in a note to Insider.
But the weakness in bitcoin could last longer than expected given that the cryptocurrency has fallen below its 50-day and 200-day moving average in recent weeks, and a potential bearish death cross seems likely over the next couple of weeks. Additionally, bitcoin fell below its 50-week moving average last week for the first time since March 2020.
Still, Stockton notes a counter-trend buy signal is likely to flash over the next week, «which would increase the likelihood of an oversold bounce and successful test of $44,200 support.» The counter-trend signal was close to flashing on Wednesday but the later afternoon sell-off in bitcoin prevented it from occurring.
«We don't see that as a setback, but rather a delay,» she told Insider.
Fairlead
Read more on markets.businessinsider.com
