Bitcoin Remains Positive Despite Price Drop
According to Fairlead Strategies, there is still optimism surrounding bitcoin despite a significant drop in its price at the beginning of the week. Bitcoin experienced a 7% decline on Monday as traders took profits from a two-month rally that has seen a 54% increase, according to Coin Metrics. This selling occurred shortly after bitcoin surpassed the $40,000 level and quickly rose above $44,000 for the first time since April 2022. However, this price drop may just be a temporary blip on the chart.
Short-Term Trend-Following Gauges Point Higher
Katie Stockton, founder and managing partner of Fairlead Strategies, stated that the recent price drop has not yet impacted their short-term trend-following gauges, which continue to point higher. She also noted that momentum in the intermediate term remains “strongly positive,” indicating that overbought conditions could be sustained without a major pullback in the coming weeks.
Support Levels and Breakout Confirmation
The drop in bitcoin’s price reached its lowest point at around $40,300, according to Coinbase. However, for investors to become more concerned, bitcoin would need to fall even further. Stockton mentioned that she is monitoring bitcoin’s 50-day moving average at approximately $37,400 as the initial support level. Other chart analysts suggest it could be around $38,000. The next significant support level is near $31,000 but is unlikely to be relevant in the near term.
Fairlead Strategies typically looks for prices to sustain new highs for two weeks. To confirm its recent breakout, they are observing if bitcoin can close above $42,200 by this Sunday. If successful, the next level to watch would be around $48,600, which represents a 61.8% retracement.
Long-Term Outlook and Key Drivers
Fairlead currently maintains a long-term neutral outlook on bitcoin. However, if the cryptocurrency can surpass $42,700 for the month, it would support a shift to a long-term bullish bias. The key drivers that have been boosting crypto prices since the summer, such as the highly anticipated bitcoin ETF and the upcoming Bitcoin halving expected in the spring, are still in place.
Bitcoin’s Volatility and Performance
Although bitcoin is considered the blue chip coin of the crypto market, it remains a high-risk investment compared to traditional assets. Volatility is a defining characteristic of cryptocurrencies, and pullbacks of up to 10% are expected among experienced investors when bitcoin experiences significant rallies. Despite this volatility, bitcoin has shown resilience by gaining 9% in December and achieving a 150% increase in value throughout 2023.
Hot Take: Bitcoin’s Resilience Fuels Optimism
Despite a recent price drop, bitcoin continues to exhibit positive trends and maintain its position as a leading cryptocurrency. Fairlead Strategies highlights the ongoing strength in momentum and indicates that overbought conditions can potentially be sustained without significant pullbacks in the near future. Support levels remain intact, and confirmation of a breakout above $42,200 would open doors to higher levels. While volatility is inherent in cryptocurrencies like bitcoin, its performance throughout December and in 2023 demonstrates its resilience and potential for growth. As key drivers like the bitcoin ETF and upcoming Bitcoin halving remain in place, optimism prevails among investors.
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