- Bitcoin has dropped below $40,000 to continue its downtrend
- A crucial support level held, but all signs point to a visit to $30,000
- What are the key areas to look at now?
Bitcoin dropped below $40,000 last night to give the clearest sign yet that it is in serious short term decline. While a crucial support level held, the news cycle around Bitcoin is almost exclusively negative, meaning that a reversal in fortunes is highly unlikely. Here we look at the possible scenarios from where Bitcoin now stands.
Down Down, Deeper and Down
Bitcoin’s drop below $40,000 has left us with a very clear and obvious scenario:
The bottom of the support range at $38,200 held for now, which suggests that a rebound is likely. However, this will only be considered a dead cat bounce unless Bitcoin can close above the same zone, around $40,500. Such price action would give us two possible bullish scenarios.
The first is a retake of the corridor between two support/resistance zones with a view to a move further up:
The second even more bullish scenario is a retake of the $45,000 zone with a view to a retest of the $53,000 in quick order:
However, we also need to look at the bearish argument. This would see a rejection of the support Bitcoin has just lost, leading to a move towards $30,000:
It cannot be argued that technically speaking we are in a clear downtrend, and it will take something special to break it before it reaches its natural point of support.
Fundamentals Don’t Look Great for Bitcoin
In scenarios such as this we have to look at the wider narrative within Bitcoin at the moment, and it certainly doesn’t look good. With the Federal Reserve on the verge of clawing back some of the trillions of dollars it has printed over the past two years, stock markets (especially the tech sector) looking like they’re about to roll over, and the news about Bitcoin being almost exclusively negative at the moment, we have to think that a trip to $30,000 is more likely than a sudden reversal of fortunes.