Bitcoin – Massive Support

Will it break this time?

It goes without saying that it’s been a pretty torrid six months for bitcoin since hitting all-time highs close to $69,000.

Soaring inflation has forced central banks around the world into action and at the most aggressive pace since the global financial crisis. What’s more, there’s much more to come, so much so that recessions may well be on the cards.

Risky assets have been pummelled as a result, few more so than the ultimate risk asset – bitcoin. Cryptos are no strangers to volatility, even the likes of which we’re currently witnessing, with bitcoin now more than 50% from its highs.

But is this time different? They haven’t had to contend with aggressive rate hikes and widespread risk aversion in the way we’re seeing now. At one time, bitcoin was being called a safe haven, an inflation hedge, and a deflation hedge, among other things. Right now, it’s clear it’s a risk asset and one that could be in for a lot more pain if a key support level is broken.

We’ve seen $30,000 tested many times before and each time it has rallied strongly from that level – there have been brief moves below but they’ve always been short-lived – establishing it as a critical level of support in the process.

If that level significantly breaks, it could be a real blow and we could see sentiment turn far more negative rapidly. Below here, there’s no obvious support until $20,000 with $24,000 perhaps offering some reprieve.

The reason is the rally after breaking above $20,000 was so aggressive it took only 17 days to hit $30,000 and it’s barely traded below since. Could we see a repeat in reverse?

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam