Crypto risks 'elevated,' Bitcoin's next price support is below $14k, Ethereum's is below $500 – Fairlead Strategies
(Kitco News) Despite being known for its volatility, Bitcoin's price action has been fairly muted as the world's largest cryptocurrency is grasping at straws to hold the $20,000 level following June's selloff. And if this support level fails, it could open the door to $14,000, according to Fairlead Strategies.
The crypto market is still reeling amid growing contagion risks, with the overall market cap down at $946 billion on Wednesday. Making things worse were reports that crypto hedge fund Three Arrows Capital (3AC) has fallen into liquidation.
This comes after crypto broker Voyager Digital sent a default notice to 3AC on Monday after the hedge fund failed to make payments on its loan of 15,250 Bitcoin, approximately $324 million, and $350 million worth of USDC stablecoin.
Singapore-based 3AC is one of the more prominent crypto hedge funds that has had a difficult time amid this crypto meltdown.
At the time of writing, Bitcoin was trading at $20,192, largely flat on the day after briefly falling below $20,000 overnight. And Ethereum, the world's second-largest cryptocurrency, was at $1,109, down 4.6% on the day.
"Bitcoin stabilized after a reaction to short-term oversold indications last week, supporting a short-term neutral bias within a bearish long-term trend," Fairlead Strategies founder and managing partner Katie Stockton said in a note this week. "Risk remains elevated given the recency of the major breakdown below $27.2K, with intermediate- and long-term momentum still strongly negative."
Looking at the technical levels, it is key that the support zone between $18,300 and $19,500 holds. Otherwise, a move to $14,000 is looking likely, Stockton wrote. "Secondary support is not until the 2019 high, near $13.9K," she said.
Initial resistance is around $27,100, but Bitcoin doesn't seem to have the trend on its side to hit that level in the short term. "Bitcoin is newly long-term oversold per the monthly stochastics, but it will likely take several months for a long-term oversold 'buy' signal to register," Stockton added.
In the meantime, Ethereum's fundamentals also point to increasing downside risks, with the next support level below $500 if current levels fail to hold, according to the note.
"Next support for Ether is near $490, a minor level based on the September 2020 peak, with more important support at approximately $363," Stockton said. "Previous support (~$1733) is resistance but unlikely relevant … Like bitcoin, Ether is newly oversold from a long-term perspective, but a fairly recent bearish shift in long-term momentum supports an extended downtrend."