Bitcoin prices have been on the mend over the last 24 hours, ripping more than 12% higher to $36,500 from Tuesday’s low.
When I say cryptocurrencies are a volatile bunch, I really mean it. Ironically, Bitcoin is one of the most stable assets in the cryptocurrency group, which really underscores some of the volatility that traders have been enduring.
Just Tuesday, Ethereum, Bitcoin and others were getting hammered.
In fact, we wrote about Ethereum, saying it had to hold the lows (where it met uptrend support) or risk a larger breakdown.
It held and so did Bitcoin. But cryptocurrencies aren’t out of the woods.
We’re being bombarding on a daily – and sometime hourly – basis with crypto-related headlines, while big swingers like Tesla’s (TSLA) – Get Report Elon Musk are just a tweet away from moving the markets.
With that all said, it’s not out of the woods.
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Coming into this week, there were some technical concerns with Bitcoin’s chart. Specifically, the cryptocurrency was putting in a series of lower highs, failed to reclaim the rising 200-day moving average and was being pressured by the declining 10-day and 21-day moving averages.
It had both short- and long-term moving averages working against it, while failing to sustain its price at higher levels. Lastly, it was leaning heavily on uptrend support.
Once support gave way, it led to a breakdown. However, while many are calling for a test of $20,000 – which is completely possible eventually – many failed to see the support zone between $30,000 and $31,000.
With a nice bounce from that level, we know this level still packs a punch – for now.
The problem is that Bitcoin is running into the underside of prior uptrend support, along with the 10-day and 21-day moving averages.
If it can’t push through this zone we have another lower high and more resistance from the short-term moving averages. That would keep the $30,000 to $31,000 zone in play, but remember, the more times an area is tested, the weaker it becomes. Notice how each bounce from this zone has become less and less robust.
On a move over the 21-day moving average, see how Bitcoin handles downtrend resistance, then $40,000. Above $40,000 and a test of the 200-day moving average and the $42,000 to $43,000 zone may be in store.