The collapse of Bitcoin following El Salvador’s rocky rollout of the largest cryptocurrency legal tender has brought to light several technical points that could indicate greater losses.
As of 9:15 in London, the virtual coin was trading for $44,900. It had fallen as high as 17% one day before paring some losses while El Salvador was undergoing some technical difficulties.
Even with today’s recovery, Bitcoin looks more vulnerable to further drawdowns.
A so-called point-and-figure analysis, which shows the direction of prices without any time dimension, showed that Bitcoin closed above the $50,000. Then it ran into resistance from another 45 degree trend-line. Failure to break this line could reinforce the bearish case.
The daily trender is also being tested by yesterday’s selloff. In July, the indicator became bullish. This indicator will turn bearish if the daily close falls below the current bullish trender line value, which is $46,650.
The importance of the $41,000-$43,000 zone is reinforced by Bitcoin’s recent price swings. This area has been a resistance multiple times since the beginning of the year and also served as support in February, just before Bitcoin reached a new record high of nearly $65,000.
Recent price swings in Bitcoin highlight the difficulty investors have to determine the cryptocurrency’s true worth amid all the volatility and noise.
Standard Chartered analysts attempted to establish a Bitcoin fundamental price range based on various metrics such as a medium for exchange, store value, and optimal portfolio positioning. The value range for Bitcoin was between $50,000 and $175,000.
Analysts Geoff Kendrick and others stated that Bitcoin shares similarities with commodities, currencies, and equities.