Last week, bitcoin made new all-time highs at nearly $65,000. But it looks like the fun might be over….for now.
Bitcoin plummeted this weekend, falling from over $61,000 to as low as $51,3000. Price has recovered slightly to $55,000, which is its lowest level since the end of March.
Rumors for the cause of the flash crash were due to the hash rate suddenly dropping. The drop in hash rate was blamed on blackouts in the Xinjiang and Sichuan regions of China which account for more than 50 percent of the overall Bitcoin mining hash rate.
If we look at its daily chart, BTCUSD broke out to a new high on April 13. While the price was able to stay above the breakout level for another two days, there was NO strong follow-through which leads me to believe that this was a fakeout (false breakout).
Price has now fallen back into its previous range between $60,000 and $50,000.
Support at the 50 SMA (purple line) is currently being tested. If you noticed the previous three times, the 50 SMA has acted as a nice dynamic support level and were good places to “buy the dip”.
Will there be finally enough selling pressure to cause the price to close BELOW the 50 SMA?
If the 50 SMA can’t hold, the next support area is around $50,000, the bottom of its range.
Bitcoin has been in a strong uptrend, noted by the series of higher lows (HL). There’s now the risk of price forming a lower low (LL) which could mean that this spectacular bull run is running out of fuel and taking a breather.
Using MarketMilk™, we can look at bitcoin’s volatility per day of the week.
As we can see, over the last 3 months, Monday has actually been the most volatile day out of the week for bitcoin.
On average, bitcoin moves 9.88% on Mondays!So if bitcoin were to trade around $55,000 by the end of today, and the price continued to fall…seeing another 10% drop would not be considered abnormal.
Such a drop would put bitcoin around $49,000 and $50,000.
If you missed the recent move up, this might be a good area to buy.
Before pulling the trigger, watch how price reacts to this area. You don’t want to be the first to impulse buy at $50,000. Since everyone and their mamas are probably eyeing the $50,000 level, expect stops to be hunted and for the price to get pushed under that level. You may be able to get in at a discount.
Another trade idea is IF price manages to still close near its 50 SMA, buy on the next candle, and place a stop below the low of the previous candle.
In terms of position sizing, I’d keep it small and not get too aggressive. Given how crazy the crypto markets are right now (ahem, DOGE), there has been lots of volatility but mainly to the upside.
So watch out when downside volatility returns. Nothing ever just keeps going up (except for stonks).
That said, if there are enough diamond hands (💎🙌) at the $50,000 level for it to hold, bitcoin’s trip to the moon err I mean uptrend should remain intact.