(Bloomberg) -- Bitcoin’s plummet has pushed it through just about every recent technical support level, forcing traders to now consider $30,000 as the next line in the sand.
The world’s largest digital asset is mired in its sixth straight day of declines, with the token down roughly 20% over the past seven days. It’s now 50% below its November peak and was trading as low as $32,970 on Monday, the lowest since July.
The coin’s selloff has pushed it to the most oversold since March of 2020, based on its Relative Strength Index (RSI) score of 19. Bitcoin is now approaching a support region of $30,000, where some analysts see it finding a near-term floor. Assets are considered overbought if its RSI crosses above 70 and oversold if it falls below 30.
“A 50% fall down is not as significant as what we have seen in previously years gone by, but it’s significant now so it’s more of a concern,” said Simon Peters, markets analyst at eToro. “The real support level seems to be around the $30,000 level, where we tested back in May after the Bitcoin mining ban in China.”
Wilfred Daye, head of Securitize Capital, the asset-management arm of Securitize, said $30,000 is psychologically important, and Bitcoin should find some support there. But, he adds, should the selloff continue beyond that to $27,000 “miners who got in at beginning of the bull market will be in trouble.”
Crypto has come under widespread selling pressure in recent days, with traders pointing to hawkish signals from the Federal Reserve as a reason to withdraw risky assets including richly-valued technology shares.
Traders often turn to technical analysis for cryptocurrencies given their volatility. And for a sense of how precipitous the decline has been, consider this: it was less than two weeks ago that traders thought of $40,000 as a key level of support. Now Bitcoin is trading roughly 15% below that level. Meanwhile, other cryptocurrencies are also down, with Ether priced at $2,240, down significantly from a November high of around $4,860.
Read more: Crypto Losses Deepen With Bitcoin Tumbling Below $34,000
“Crypto market capitalizations across the board became hugely inflated and priced in a tremendous amount of growth due to a dovish Fed, and the tightening path the Fed is pursing is bringing liquidity out of the system and resetting outlandish valuations that weren’t keeping up with true usage,” said Avi Felman, a portfolio manager at BlockTower.
The 40-day correlation coefficient for Bitcoin and the tech-heavy Nasdaq 100 index has reached almost 0.66, the most in data compiled by Bloomberg since 2010. A similar correlation with the S&P 500 is also at a historical level.
Here’s what other market-watchers had to say:
Leah Wald, CEO at Valkyrie Funds: “This selloff is largely a result of traditional markets entering correction. The narrative around Bitcoin being a non-correlated asset clearly isn’t holding up, and the notion that its reached safe haven status appears to be a bit naïve. That isn’t to say this won’t happen in the future but, right now, Bitcoin is a risk asset and all other digital assets have historically gone as Bitcoin goes.”
Jon Venverloh, COO of Hypernet Labs, a cyber-infrastructure provider: “Federal interest rate policy, inflation, worldwide supply chain shortages, and ongoing global unrest are having an adverse impact on markets of all sorts. Crypto is not immune to widespread shifts in investor confidence, and this too shall pass.”
Coming up, the Biden administration is preparing to release an initial government-wide strategy for digital assets and task federal agencies with assessing the risks and opportunities they pose, according to people familiar with the matter.
“The market is much more susceptible to negative news like we’re seeing over the last weekend and the last few weeks,” James Malcolm, head of foreign exchange research at UBS, said by phone. “And that creates a very unstable environment because a lot of people who have hoarded coins are now beginning to come under pressure.”
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