Bitcoin's sell-off could continue another 18% lower as the crypto breaks through a key support level, technical analyst says
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- Bitcoin faces an increased risk of falling 18% after breaking below a key support level, according to Fairlead Strategies.
- The firm highlighted $57,800 and $51,500 as two key levels of support to watch going forward.
- "We see the pullback as an interruption in the uptrend, not the start of a bearish reversal," Fairlead said.
The recent sell-off in bitcoin increases the risk of further downside as the cryptocurrency attempts to reclaim a key support level, according to technical analyst Katie Stockton of Fairlead Strategies.
Bitcoin sold off over the weekend amid a rise in geopolitical tensions, falling below its key support level of $64,900 and below its 50-day moving average. The cryptocurrency is down 13% over the past week and is down 16% from its record high reached on March 14.
According to Stockton, the next level of support, or where buyers should logically step in and limit further downside in the price of bitcoin, is at $57,800, representing potential downside of 8% from current levels. If that level breaks, Stockton highlighted $51,500 as bitcoin's next support level, representing potential downside of 18% from current levels.
"Given increased short-term risk, we assume the weekly stochastic will confirm their downturn in an intermediate-term setback," Stockton said, highlighting a key momentum indicator traders use to gauge the trend of a security.
Fairlead's short-term momentum signal has flipped to bearish from bullish this week, while its intermediate-term momentum signal has flipped to neutral from bullish. The firm's long-term momentum signal for bitcoin is still positive, which gives Stockton confidence that the decline in bitcoin could represent a healthy correction before a resumption of the uptrend.
"We see the pullback as an interruption in the uptrend, not the start of a bearish reversal, given the recent breakout above the 2021 high which targets ~$80,600 over the long term," Stockton said.
Stockton's resistance target of $80,600 represents potential upside of 29% from current levels.