- Bitcoin has chalked up an almost $20,000 loss from its highs nine days ago
- Six weeks worth of gains have been eradicated during that time
- What are the key support zones, and when can we expect a bounce?
Bitcoin fell to $48,575 overnight, chalking up a near $20,000 from its peak nine days ago. The drop has been put down to a combination of negative news and liquidations, plus the natural correction that many knew has been inevitable for some time. With the uptrend well and truly stalled, for the time being at least, where should we deploy our massive bags of fiat?
Writing on the Wall with 50-day MA
The writing was on the wall when Bitcoin closed underneath the 50-day moving average last Saturday, breaking an uptrend that had been in place since early October 2020:
The breaking of such a major uptrend was never going to resolve itself quickly and so it has proved, with drop after drop taking place since then, slicing through support levels along the way:
Bitcoin is famous for its 40% corrections during a bull run, and providing this drop doesn’t represent the end of the entire bull run. Such a drop now would see Bitcoin bouncing around the $39,000 level. Just a few days ago this would have seemed a remote possibility, but not now, especially when we look at the next few support zones:
Indeed, the $39,000-$41,000 area looks very tempting as a support zone should Bitcoin fall through the $49,000 region, which could represent a final flush. Hundreds of millions of dollars have yet again been liquidated in this move, showing that people are still keen to long at support levels, and the $45-$46,000 zone will be no different, potentially with the same result.
Bitcoin Bounce Imminent?
There are also several signs that the bottom could be in, however. The first is the Bitcoin RSI which is at its lowest point since the March 2020 crash and is now verging on being oversold:
The second is slightly more prosaic but nevertheless relevant, at least historically – The Crypto Fear and Greed Index. The index has unsurprisingly taken a hit in the last few days and now sits at 55%, although this is still technically greed (we have previously spoken about the efficacy of the index during a bull run). The last time the index was this low was March 26 following a drop from $62,000 to $55,000, the result of which was the bounce $65,000 we have just witnessed.
If Bitcoin shows some strength here, all eyes will be on the most recent support level it broke at around $51,000 – if it breaks back above and holds it as support again then the recovery should be on, but if it rejects then we can start looking at those lower levels.