Bitcoin’s slump following El Salvador’s troubled rollout of the largest cryptocurrency as legal tender has put several key technical levels into focus that could point to greater losses ahead.
The virtual coin was trading at about $44,900 as of 9:15 a.m. in London, having slid as much as 17% a day earlier before paring some of the losses while El Salvador was working through some first-day technical glitches.
Even with today’s recovery Bitcoin is looking more vulnerable to further drawdowns.
According to a so-called point and figure analysis — which spotlights the direction of prices without a time dimension — Bitcoin managed a daily close above the key $50,940 level last week before running into fresh resistance from another 45-degree trend-line just above the first. A failure to breach this line could strengthen the bearish case once again.
Yesterday’s selloff is now also testing support from the so-called daily trender. The indicator turned bullish in July. Any daily close that ends below the value of the most recent bullish trender line — that currently lies at $46,650 — will flip this indicator back to bearish.
Bitcoin’s recent price swings reinforce the importance of the $41,000 to $43,000 zone. This range has served as resistance several times since the start of the year, and even acted as support in February before Bitcoin hit a record of almost $65,000.
The latest price swings in Bitcoin underscore the difficulty for investors to get a read on the cryptocurrency’s true value amid the noise and volatility.
Analysts with Standard Chartered have attempted to determine such a fundamental price range for Bitcoin, based on metrics including as a medium of exchange, store of value and optimized portfolio positioning. The group ended up with a wide value range for Bitcoin of $50,000 to $175,000.
“We believe Bitcoin shares characteristics with currencies, commodities and equities,” analysts including Geoff Kendrick said in the report.