Things are still looking up for bitcoin despite an eye-popping drop in its price at the beginning of this week, according to Fairlead Strategies. Bitcoin fell 7% Monday as traders took profits from a two-month rally now at 54%, according to Coin Metrics. The selling took place days after bitcoin surpassed the $40,000 level, rising above $44,000 quickly for the first time since April 2022. On Tuesday, it was trading at about $41,000. That could just be a blip in the chart, however. “It has yet to impact our short-term trend-following gauges, which point higher,” Katie Stockton, Fairlead Strategies founder and managing partner, said in a chart update Tuesday. She also said momentum in the intermediate term remains “strongly positive,” which suggests overbought conditions “can be sustained without a major pullback in the weeks ahead.” The drop began Sunday evening and at its lowest, pulled bitcoin down to $40,300, according to Coinbase. It’d have to fall even further, however, to warrant more concern by investors. Stockton said she’s watching bitcoin’s 50-day moving average, roughly $37,400, as the initial support level. Other chart analysts put it at $38,000 . The next level down is near $31,000, but Stockton said that’s “unlikely to be relevant near term.” When prices reach new highs, Fairlead typically looks for them to sustain the new level for two weeks. The firm is looking to see if bitcoin can close this Sunday above $42,200 to confirm its recent breakout. That would make the next level higher to watch at about $48,600, which would be a 61.8% retracement, Stockton said in the note. Fairlead currently has a long-term neutral outlook on bitcoin. If the crypto can clear $42,700 for the month, that would support a shift to a long-term bullish bias, Stockton said. The key drivers that have been pushing crypto prices higher since the summer are still in place: primarily, the highly anticipated bitcoin exchange-traded fund, as well as the upcoming Bitcoin halving, expected in the spring. Bitcoin may be the blue chip coin of the crypto market, but it’s still a high risk bet compared to more traditional assets. Volatility is a key characteristic of the asset class, and pullbacks of as much as 10% are somewhat expected among more seasoned investors when bitcoin has big rallies. Bitcoin is currently up 9% in December, not a particularly strong month for bitcoin historically. It has gained 150% in 2023.
