It’s been a brutal year for anything considered a risk-on asset, and bitcoin and cryptocurrencies more broadly are no exception.
The group has been hammered, while some of bitcoin’s biggest advocates — like Cathie Wood and Elon Musk — have been steamrolled via their own assets, like the ARK Innovation ETF (ARKK) – Get Free Report and Tesla (TSLA) – Get Free Report.
Of course, the blowout from the FTX scandal didn’t help, as trust must be at or near an all-time low for crypto.
As for bitcoin specifically, the charts don’t look all that constructive.
I’m not a doom-and-gloom type of person. But after years of working in technical analysis, you can get a pretty good sense of a good trend vs. a bad trend with a glance at the charts.
In time, bitcoin might well rebuild a constructive upside trend. For now, the charts don’t look good.
How can a trader make a snap observation on a chart? In the case of bitcoin, take note of two things.
First, it’s below all its daily moving averages, ranging from the 200-day down to the 10-day. That shows that both the active trend and the long-term trend have been bearish.
Second, the prior support zone between $18,000 and $18,500 failed, then turned to resistance.
From here, though, we can strategize.
So long as bitcoin is below all its daily moving averages, the recent low near $15,500 remains vulnerable. We’ve seen that level hold twice now, but can it hold as support again if it’s tested?
If it can, traders have a line in the sand to trade against. If not, it opens the door down to the $13,750 area, which is the prior breakout zone from 2019 and 2020.
On the upside, let’s see if bitcoin can get a daily close above its 10-day, 21-day and 50-day moving averages, say $17,000.
If it can do that, it would technically open the door back up to the $18,000 to $18,500 zone.
I don’t know that bitcoin has bottomed; if I’m forced to estimate, experience tells me it has not.
The trends are still bearish, and bullish traders must remain defensive and tactical when trading bitcoin.
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