Bitcoin's Breach of $10,000 Triggers Sell Signal for Technicians

(Bloomberg) -- Bitcoin’s meteoric rise and subsequent plunge has crypto investors scrambling for ways to make sense of the market. Wall Street certainly has tools, but do they offer any meaningful insight for an asset like Bitcoin?

Yes, say technical analysts, the folks who study charts for clues on where a stock or currency will turn. And after Bitcoin’s 50 percent plunge in the past month took it through $10,000 Wednesday, they’re prepping for the worst as key resistance levels approach.

Evercore ISI analyst Rich Ross warns that the 50 percent retracement from the largest cryptocurrency’s all-time high heightens the risk that the digital coin will break its 100-day moving average of $8,787. Bitcoin dropped as much as 14 percent Wednesday to $9,185. It climbed to a record $19,511 last month.

“Bitcoin has held the 100-day since 2015, so you MUST sell it below there,” Ross wrote in report Wednesday. “You have to respect a break below that level as your final warning.”

Ross also advises caution on crypto cousins Litecoin and Ethereum, which have mirrored Bitcoin’s fall. He recommends keeping an eye on Litecoin’s 100-day moving average of $142 and Ethereum’s 50-day moving average of $772.

The calls represent an about-face from Ross’s position less than a week ago, when he recommended buying Bitcoin, Ether, Ripple, and Litecoin. Bitcoin’s stunning slump from December’s record high has traders and strategists scrambling for explanations, from regulatory concerns to the Lunar New Year.

Not all analysts see gloom in Bitcoin’s technical picture. Key levels will likely hold sway for traders, according to Mati Greenspan, senior market analyst at currency trader eToro in Tel Aviv.

“Financial markets like to latch on to round numbers because they hold psychological importance for traders,” said Greenspan. “Bitcoin is no different. Analysts will be looking for the next significant level of support, which could come in around $8,000 a coin.”

--With assistance from Todd White

To contact the reporter on this story: Katherine Greifeld in New York at kgreifeld@bloomberg.net.

To contact the editors responsible for this story: Jeremy Herron at jherron8@bloomberg.net, Dave Liedtka, Randall Jensen

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