Bitcoin rebounded from earlier losses this week to rally 11% late Thursday, retracing most of its weekly decline. But the world’s largest cryptocurrency may not be out of the danger zone just yet, chartists say.
Bitcoin is coming off one of its most volatile weeks of the year as it continues to test a critical resistance level. After falling below $50,000 on Monday, Bitcoin is now trading just above $60,000, paring its weekly losses to 3%, according to data from Coin Metrics.
“Bitcoin was nicely oversold after it broke $53,000 on Monday, so there’s some relief,” Ron Ginsberg, chart analyst at Wolfe Research, said in an interview. “I always find it important to see how an asset responds to an oversold situation, because that’s what really matters.”
Ginsberg noted that if Bitcoin breaks past the current resistance level, it could be on track to test $70,000, potentially paving the way for new all-time highs. However, he also warned that if the rally stalls and Bitcoin fails to maintain its position above $60,000, a retest of this week’s lows could be imminent. In a worst-case scenario, Bitcoin could fall to $40,000.
For much of this year, Bitcoin has fluctuated between the $55,000 and $70,000 range after pulling back from all-time highs above $73,000. This week, BTC has hovered around the $56,500 level, a level it should now hold on a weekly close basis, according to Will Tamplin of Fairlead Strategies.
“Our medium-term metrics for Bitcoin are pointing lower, so we expect a bounce that would lead to a deeper pullback to around $51,500,” Tamplin told CNBC, adding that while a cyclical uptrend continues for Bitcoin, the longer-term momentum has slowed due to the ongoing corrective phase.
*This is not investment advice.