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Bitcoin’s big surge in price over the weekend has likely created the conditions for a consolidation phase before the cryptocurrency can take another step up.
The digital currency lost up to 15% over the weekend, and competing coins like Ethereum also fell.
Bitcoin was trading around $ 55,970 at 4:00 p.m. ET. Some crypto-linked stocks were lower. Coinbase lost nearly 2.6%. Meanwhile, Voyager Digital was down 9.6% and Marathon Digital Holdings was down 8.7%.
“There has been a lot of rumor and speculation about what drove the market down over the weekend. For me, this is due to excessive leverage within the system,” said Leeor Shimron, vice president of digital asset strategy at Fundstrat. “We’ve seen it in the past few weeks, particularly with Bitcoin, but it has spread to other asset classes as well.”
Shimron said there was a large down payment from Bitcoin via the Binance cryptocurrency exchange over the weekend, fueling speculation.
“When the sell-off happened this weekend, approximately $ 5 billion worth of bitcoin contracts were liquidated and $ 9.5 billion was liquidated including the altcoin markets,” Shimron said.
“Specifically, this is double the face value compared to Black Thursday 2020 when Bitcoin price fell ~ 50% in 24 hours. The fact that this sell-off resulted in a drop of only 15% and rebounded quickly speaks for itself.” for how strong the market is has grown and matured over the past year. “
A decline below the 50-day moving average
Bitcoin fell below its 50-day moving average in weekend trading and was below it again on Monday. The cryptocurrency recently traded near $ 65,000 but was around $ 55,900 on Monday afternoon, according to Coin Metrics.
Julian Emanuel, head of equity and derivatives strategy at BTIG, expects Bitcoin to trade in a range between $ 50,000 and $ 65,000 after the weekend shakeout. He said it could have entered a period of lower volatility as it consolidated before moving higher again.
Emanuel said he was watching the 50-day moving average at around $ 56,500.
A longer break below the 50-day moving average warns of negative price dynamics.
“Yesterday’s surge was at a low of $ 51,707. I would literally define it as the point of maximum frustration,” said Emanuel. “If you’re a bull or a bear, you’ve all passed the 50-day moving average and we believe the best outcome is to get you held until the maximum frustration for the volatility to kick in and the price to correct . “”
“It is our current expectation and desire for the long-term health of the crypto market that we make a timely correction where both the bulls and bears are disappointed with the price move,” he said.
A run-up before Coinbase’s debut
Bitcoin fell to nearly $ 65,000 ahead of the recent Coinbase debut on the Nasdaq, which was seen as new bait to get investors into crypto assets. “The least healthy thing would be a short-term break down or up for the range we set last week,” said Emanuel.
Fundstrat’s Shimron said he went into the weekend and saw the $ 60,000 level as it was supposed to keep bitcoin at the key level. But it failed and Bitcoin temporarily moved closer to $ 50,000
“I wouldn’t be surprised if there was a longer period of consolidation over the next few weeks until $ 60,000 is recovered,” said Shimron. “We believe Bitcoin will go higher for the rest of the year even if we consolidate over the next few weeks.”
Fundstrat expects Bitcoin to hit $ 100,000 by the end of the year.
Katie Stockton, chief technical strategist at Fairlead Securities, said if Bitcoin is below the 50-day moving average for two days in a row, the next step could be to the support level of around $ 42,000.
“I think until we see the crucial 50-day moving average breach we will remain neutral in the short term,” she said.
Stockton said on the upside for Bitcoin, their next target is $ 69,000.
She said she wasn’t surprised at the sell-off after the big surge. “It makes sense that any steep upward trend is digestive,” Stockton said.
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