Bitcoin has shed more than 50% of its value since hitting an all-time high near $126,000, and the market is now tightly closed at a support level that analysts say could determine the next big move for the digital economy.
The cryptocurrency has been testing the $58,000-$60,000 range for the third time in recent months, a region that chart watchers consider challenging. Below that threshold, the next meaningful support is below the $40,000s, a drop that could push Bitcoin into a new low similar to its previous bullish territory.
Sales have been fast and accurate. Bitcoin’s failure to climb higher went straight to the 200-day moving average, a level that acted as resistance and led to a decline of about 30% from that ceiling. The pattern has left the stock in the clear, although some technical indicators are starting to highlight bearish signs.
“We want stability,” he said Katie Stockton, founder and managing partner of Fairlead Strategies on CNBC’s Squawk Box. “In fact, it happens this way because it is the most important part of Fibonacci, where the complete repetition takes place.”
Stockton noted that Bitcoin has been in a long-term trend that, based on history, tends to lead to rapid reversals. That doesn’t mean a decline is guaranteed, he said, adding that he wants to see two to three weeks of stabilization in prices before he can be sure that support is in place.
The $60,000 level carries more weight Fibonacci math. It represents an emotional symbol and has been a battleground in several trials. A clean break in the bottom line can destroy trust between vendors and their organizations.
80% off bitcoin price
Some Bitcoin bulls have pointed out that this cycle is markedly different from previous crashes. The presence of Bitcoin ETFs, the establishment of growing institutions, and greater acceptance, he says, could destroy the depth of the decline compared to the 80%-plus falls seen in previous bear markets. Stockton isn’t sure the argument holds.
“I think we could see a 75 to 80% drop,” he said, “but as an analyst, I see volatility as an opportunity.”
This arrangement reduces the tension at the heart of Bitcoin trading: the difference between what investors say they want and what they do when prices fall. At $125,000, many buyers felt it was worth the price. At $60,000, those same buyers are reluctant to pull.
Market psychology, Stockton said, is opposed to rational accumulation.
On the question of four years and a half cycle – a framework many Bitcoin traders see as good news – Stockton said the sample size is too small to put any confidence in the system. He described himself as a Bitcoin bull from a “very long-term perspective,” while maintaining that short-term risk management through the use of tracking tools remains a viable option.
Currently, Bitcoin is on the line. The coming weeks will test whether the group’s infrastructure and long-term interests are enough to hold the line that, if broken, goes far to the bottom.
