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Bitcoin Sell-Off Deepens Below $40K; Minor Support Nearby

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Bitcoin (BTC) failed to hold short-term support at $40,000 as sellers maintained the two-month long downtrend.

Intraday oversold signals were not enough to sustain bids, which means longer-term indicators are more reliable to determine bitcoin’s price direction.

BTC was trading around $38,000 at press time and is down about 10% over the past 24 hours.

The slowdown in upside momentum on monthly and weekly charts has been a persistent theme since December. As the long-term uptrend weakens, sellers typically outweigh buyers despite occasional oversold signals.

Further, when drawdowns (percent decline from peak to trough) become severe, short-term traders tend to reduce their position sizes and tighten trade parameters around intraday support and resistance zones.

Bitcoin is roughly 40% below its all-time high of $69,000, which is a significant drawdown. The previous drawdown extreme was in July when BTC settled near $28,000 after falling roughly 50% from its peak.

For now, initial support is around $37,000, which could stabilize the current sell-off. The relative strength index (RSI) on the daily chart is the most oversold since May 19, which preceded two months of sideways trading before a rebound occurred.

If selling pressure accelerates over the next week, BTC could find stronger support around $30,000.

DISCLOSURE

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Damanick is a crypto market analyst at CoinDesk where he writes the daily Market Wrap and provides technical analysis. He is a Chartered Market Technician designation holder and member of the CMT Association. Damanick is also a portfolio manager at Cannon Advisors, which does not invest in digital assets. Damanick does not own cryptocurrencies.

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