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Crypto risks 'elevated,' Bitcoin's next price support is below $14k, Ethereum's is below $500 – Fairlead Strategies

Kitco News

(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."

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