Bitcoin dipped below $40,000, then bounced. What’s next?
Bitcoin’s price bounced off a strong support zone, but a break could send it tumbling again.
Bitcoin has entered a bear market since it reached all-time highs above $68,000 back in November. In December and early January, the price was stuck in a range between $45,000 and $51,000. On Monday, it fell slightly below $40,000 but quickly recovered.
All this volatility makes for a 38% drop from the peak in just a few months.
There are multiple reasons Bitcoin is down, including profit-taking, Federal Reserve actions to curb inflation and the shutdown of the Internet in Kazakhstan for a few days. Kazakhstan is responsible for roughly 15% of Bitcoin mining, the computer-driven creation of new Bitcoin.
How low might Bitcoin go?
In technical terms, $40,000 acts as a strong support zone, meaning it could prevent the price from dropping further because it’s a point where buyers are drawn in. Indeed, the price has risen since that mark was crossed.
A previous support of $45,000 now acts as a resistance zone, meaning the exact opposite — it makes it harder for the price to push higher due to selling at that point.
Image source: Stockcharts.com
Bitcoin’s weekly chart shows a classic head and shoulders pattern, and the price has already pushed through the $45,000 support zone. That suggests a drop.
If the pattern fulfills itself and then breaks below $40,000, Bitcoin could fall as low as $30,000, the next major support zone. What’s more, the current price now trades below the 50-moving average Bitcoin price, which is another bearish signal.
How high might Bitcoin move?
For the price to move higher, Bitcoin must first break the $45,000 level. The next resistance zone is at $50,000. Multiple moving averages and resistance zones converge at this price, which means a strong catalyst would be required for Bitcoin to break above that in the short term.
Kliment Dukovski owns Bitcoin as of the publishing date.
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