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The cryptocurrency is now testing key technical levels after Tuesday's sharp sell-off.
These levels will allow traders to assess the trend direction of bitcoin.
Katie Stockton, technical analyst at Katie Stockton, stated that the long-term outlook is bullish and supported by an upward-sloping 200 day moving average.
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The cryptocurrency is currently experiencing volatile selling as the technical price points become more clear.
Bitcoin dropped as high as 17% Tuesday when El Salvador accepted the digital currency as legal tender. A surge in trade volume and increased market activity caused a flood of orders, which ultimately led to service outages on Coinbase, a popular cryptocurrency-exchange platform.
Traders are now focusing on key technical levels in Bitcoin that could help them assess the trend for the cryptocurrency moving forward.
Bitcoin had broken above the $51,000 level on Monday, with daily closes that were above this level for consecutive days. However, Tuesday's plunge raises the possibility of a failed breakout which could cause more downside if support levels are not held.
These support levels include a group of moving averages that all converging between $43,000 to $46,000. The current 50-day moving mean is $44,400. The 200-day moving mean is around $46,000. And the 10-week moving median is close to $43,000.
A horizontal resistance level of $47,000 is now in play. It was previously used as support during bitcoin's rise to $65,000 within the first months of 2021. Technical analysis is based on the rule that old support will become new resistance. This rule is often used in technical analysis. Bitcoin currently trades at $46,247 as of the time this article was published. This level is being interpreted as resistance, while the moving average cluster acts as support.
Fairlead Strategies' technical analyst Katie Stockton says that the long-term outlook for bitcoin is bullish, despite recent volatility.
Stockton stated that the long-term outlook is bullish and supported by an upward-sloping 200 day moving average. He also said that long-term momentum is positive.
Stockton believes that bitcoin could surge to $65,000 if it retakes its key resistance level at $51,000. A continued decline in bitcoin above both $47,000 and the cluster moving averages would indicate a fall to $40,000 with additional support levels in the $30,000 area.