Bitcoin broke the key support at $42,000, paving the way for another decline. A break below the 200 SMA support will cause losses as deep as $30,000.
Bitcoin is in more turmoil after breaking out of $45,000 and extending its correction below last week’s key support at $42,000. The bearish trend of the pioneer cryptocurrency seems unstoppable from a short-term technical analysis perspective. Therefore, the savior for investors right now is the 200 SMA on the daily chart.
Bitcoin can barely hold $40,000
After a drop from prices slightly above $45,000, the leading cryptocurrency extended its correction below $40,000 before accepting the support offered at the 200 SMA on the daily chart.
Defending this important support area will be the key to avoiding another strong downtrend. The last time the 200 SMA was broken was in March 2020, when Bitcoin unexpectedly dropped to $3,800.
Currently, BTC trades at $40,540 at press time. The line of least resistance appears to be moving downwards based on the applied short-term technical indicators. With the RSI entering the oversold zone and showing no signs of recovering, BTC is bound to extend its downtrend even further.
BTC/USD Daily Chart
The MACD line concurs with the bearish outlook as observed on the histogram. For example, the indicator slipped below the moving average (0.00) and is now exploring how long the “red candlestick” will be in the negative zone. Similarly, the MACD’s divergence from the signal line has been absent since it was broken in March 2020.
It can be said that Bitcoin’s downtrend is unstoppable at the moment unless the 200 SMA appears as a solid “anchor”. Therefore, investors should wait for a real break above $40,000, if this happens then predict a recovery towards $50,000.
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