Bitcoin price Suffers Pullback, Damaging Technical Landscape
Bitcoin suffered a considerable setback to start the week as the cryptocurrency plummeted more than $10,000 in a matter of hours. Amidst the declines, Bitcoin broke beneath ascending trendlines and the crucial $50,000 psychological level, dealing damage to the technical outlook even as the fundamental foundation remained constant. While a recent wave of corporate adoptions has provided an encouraging tailwind for the cryptocurrency – and shorter-term pullbacks may prove healthy after its meteoric rise – Bitcoin will need to avoid a series of lower-highs and lower-lows in the coming days to stave off a prolonged downtrend.
As it stands, however, there is little to suggest the pullback suffered Monday will mark the advent of such a retracement. That said, the declines have eroded the technical landscape which may make future pullbacks easier to establish now that support has been weakened. Most notably, the rising trendline from late January, around $48,000, suffered a breach that will might its influence reduced going forward. The psychological level at $50,000 was similarly broken.
Should the initial pullback continue and a series of lower lows and lower highs is established, Bitcoin could face a deeper reversal. Potential support might reside along the series of swing highs from January around $42,000, $40,000 and $38,300 respectively. Slightly lower still, from $30,000 to $28,000, resides a “line in the sand” that could see losses accelerate – although it lies some distance from the current trading price.
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Nevertheless, Bitcoin has a penchant for volatility and losses can mount as quickly as gains, a fact traders should carefully consider. In the meantime, keep up to date on recent price developments and analysis using Twitter by following @PeterHanksFX.
–Written by Peter Hanks, Strategist for DailyFX.com
Contact and follow Peter on Twitter @PeterHanksFX
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