What a train wreck we’re observing in the crypto world. Bitcoin prices are about flat on the day, but were down almost 10% to sub-$30,000 at one point early Tuesday.
That’s a loss of more than $3,000 per Bitcoin. The decline follows Monday’s fall of more than 11% as worries over a crackdown in China hit the cryptocurrency.
In fact, Bitcoin has been on a pretty rough run lately. Now down in seven of the last eight trading sessions, it has now fallen almost 31% from last week’s high. That’s a loss of more than $12,700 a coin.
The decline is obviously stressing out crypto bulls, many of which have piled into Bitcoin, Ethereum, Dogecoin and others hoping to cash in big on the coming boom.
While we did see a nice boom, we’re now seeing the “bust” side of that equation.
With all that said, Tuesday's low puts Bitcoin back toward the January lows. So it's not as if we're seeing a multi-year breakdown. That said, it's down more than 50% from the highs.
Let's look at the chart.
Bitcoin looked to be breaking down this morning, but bulls are salvaging the trade. It continues to bounce from the $30,000 to $31,000 range, a zone I emphasized earlier this month.
The crypto was able to push through some important trends and moving averages, ultimately climbing toward the $42,000 resistance mark we were watching.
However, it failed to push through this level and went on the painful losing streak referenced above.
So what now?
We have to respect the $30,000 area as support. It’s been support and until it breaks, it remains support. However, the more times a level is tested, the more suspect it becomes of failing.
If Bitcoin were to lose the $30,000 mark and the 50-week moving average, it’s hard to say where the bottom may rest.
It could be just below this area before a strong reversal takes it back up through $30,000. We see this action often and it’s often referred to as a “look below and fail” — the “failing” meaning it traded below support and failed to stay below it.
If we get a rebound, let’s see how Bitcoin handles the $35,000 area and the 10-day moving average. Back above these measures could open up a return to $40,000.
If Bitcoin can’t hold the current area as support, we could be looking at a larger dip down toward $25,000.
Specifically, the 161.8% downside extension from the current range comes into play around $22,650. Below that and it’s possible Bitcoin retests that key $20,000 area.