By Samuel Indyk
Investing.com – dropped below $40,000 on Monday for the first time since 21st September as the sell off in cryptocurrencies continued into another week. , the second largest cryptocurrency by market cap, fell below $3,000 for the first time since 1st October.
There had been signs that the recent selling in cryptocurrencies had abated over the weekend after Bitcoin made a brief rebound on Sunday, having traded as low as $40,574 on Saturday. However, the selling pressure resumed on Monday as the prospect of tighter global monetary policy continues to weigh on cryptocurrencies.
Last week’s from the Federal Reserve’s December meeting was the catalyst for the latest weakness in cryptocurrencies as the Fed signalled that may have to increase faster than previously thought. The central bank also suggested that they could begin shrinking the balance sheet soon after the first rate increase.
Bitcoin is now behaving like a risk asset and has tended to fall recently when market risk sentiment is weak and rise when risk sentiment improves.
After breaking below the psychological $40,000 level, focus will now be on the September low of $39,650. If that level breaks then $37,500 will be another key level of support which was the low from early August.
Another point of interest is that the 50-day moving average is now just around $1,300 higher than the 200-day moving average. If the shorter term moving average drops below the longer term one it is known as a ‘death cross’ and is used by technical analysts to indicate a bearish trend.
The 200-day moving average resides at $48,240 and the 50-day resides at $49,566.
If Bitcoin manages to return above $40,000 and hold that level then it may signal that the selling pressure has subsided for now. To the upside, the next levels of resistance are $42,500 and the 61.8% fib retracement level from the June low to November high at $44,283.
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