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A Technical Look At Bitcoin As Crypto Sells Off

June 21, 2021 4:14 pm
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A Technical Look At Bitcoin As Crypto Sells Off

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On April 14, the Bitcoin futures contract — @BTC on the TradeStation platform — at the Chicago Mercantile Exchange made its all-time high at $65,870. The following day, it posted its all-time closing high at $64,190.

On May 1, Tesla Inc (NASDAQ:TSLA) CEO Elon Musk appeared on "Saturday Night Live"; Bitcoin (CRYPTO: BTC) was trading at $57,380 the preceding Friday.  

At that time, Dogecoin was trading just off its all-time at 39 cents and was on its way to its all-time high that was made on May 7 at 72 cents. 

It has been mostly downhill for both cryptocurrencies ever since.

Up Like An Escalator, Down Like An Elevator: Once Bitcoin finally breached $20,000 for good in mid-December, it took four months for the cryptocurrency to make its all-time high in mid-April.

In only eight sessions (May 10-19), it was cut in half, falling from an intraday peak on May 10 ($59,965) to an intraday low on May 19 ($30,270).

Why? The main culprit for the decline was investors who were overleveraged and seeking to get rich quick when Bitcoin was on its way to $100,000.

When their stakes began to erode, and quickly, forced liquidation wiped out thousands of accounts that should not have been afforded the leverage given to them.

Musk Turns From Friend To Foe: Following the wash-out low on May 19, Bitcoin rebounded sharply the next day and reached an intraday peak of $42,495, ending the session at $40,385. Interestingly, the front month futures contract has failed to breach that all-important daily high moving forward.

It should be noted that Bitcoin did make two attempts to clear that hurdle last week but was turned away in the lower $41,000 handle on both occasions.

The primary reason for some of the skittish trading in the currency this month has been the schizophrenic tweets from Musk's Twitter account. After his company took a large stake in the currency and announced it could be used to purchase Teslas when Bitcoin was on the way up, he backed off due to the energy used by Bitcoin mining.  

As of late, he has flipped back to the bullish side — to no avail for the currency.

Here Comes China: While the small country of El Salvador has adopted the cryptocurrency as a legal tender, a behemoth like China has not. Over the last week, the Chinese government has taken steps to curtail the usage of Bitcoin throughout the Chinese economy. 

On Monday, the crackdown intensified, taking aim at cryptocurrency mining that has extended to the southwestern province of Sichuan.

More importantly, the People’s Bank of China said Monday it had urged Alipay and some major banks to crack down on crypto trading.

Trading Range Or Not? Any trading instrument that has violent moves in either direction will have periods of consolidation. In other words, it will digest the large move and its long-term implications and decide whether it is a much-needed correction or a change in trend.

Over the last 22 sessions, Bitcoin has churned between $31,000 and $41,000, with a vast majority of the price action just above and below $35,000.

With the news out of China on Monday coupled with four down days to end last week, Bitcoin is now bearing down on the bottom of the trading range. 

Bitcoin was down 8.34% at $32,536.10 at last check Monday. 

If it holds true to its form over the past few months, Bitcoin will find support in this area and rebound. If the decline worsens and it breaches the trading low, which was buffeted by the March low ($29,965), the contract may test the area from where it broke out, at $20,000.

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