At the end of last week, stocks were looking vulnerable, but so too were cryptocurrencies.
Ethereum gave an early weekly-up rotation, but bitcoin was lagging the No. 2 cryptocurrency (by market cap). It couldn’t rotate like ether.
Instead, it broke down later in the week — just as the stock market did. In fact, bitcoin fell more than $6,000 from its Friday high to the session low, then collapsed on Saturday.
It fell almost $12,000 from peak to trough that day. From the all-time high less than a month ago, bitcoin was down $27,000 a coin, or 39.2%.
Bitcoin is again lower on Monday, but it’s currently bouncing off the lows and is down less than 1%.
Let’s see if the charts can provide any clarity.
In mid-November, we looked at buying the dip in bitcoin. After a tepid bounce, it broke below support, then support turned into resistance.
That was the first sign investors should have noticed — when bitcoin failed to hold the 50-day moving average and $60,000 level — as the tone in this had changed significantly.
After that wild range we saw on Dec. 4, it’s hard not to have an inside day where the session’s range is completely contained within the prior session’s range.
Coming into Monday, that’s what we have, as bitcoin continues to hold the 50-week and 200-day moving averages.
If bitcoin can get above yesterday’s high at $49,750 — or better yet, get above $50,000 — and close above these levels, we could see a larger bounce.
Preferably, the cryptocurrency will be able to get up to the 21-week and declining 10-day moving averages.
If it can, bitcoin will have to contend with the $53,300 to $54,000 area. That zone has been support since early October and was the breakdown area a few days ago.
If it can’t recover this zone, it may act like the “tone change” we saw near the 50-day moving average and $60,000 level.
Back above $54,000 and bitcoin will have to contend with several downtrend measures, like trend resistance and its moving averages.
It will not be an easy ride back to new highs unless bitcoin can clear $60,000.
On the downside, I really don’t want to see bitcoin lose the 50-week moving average.
If it does, a move below the 200-day opens up the weekly VWAP measure near $43,500 and technically makes last week’s low vulnerable near $40,150.