Bitcoin enters make-or-break mode amid sharp sell-off as key technical levels come into focus

• Bitcoin's steep sell-off on Tuesday has the cryptocurrency testing key technical levels.
• How bitcoin reacts at these levels will help traders assess trend direction in the cryptocurrency.
• "The long-term outlook remains bullish, supported by an upward sloping 200-day moving average," technical analyst Katie Stockton said.
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$4 volatile sell-off on Tuesday has the cryptocurrency testing make-or-break levels as key technical price points come into focus.

Bitcoin $4 the digital token as legal tender. The spike in volume and heightened market activity led to a flood of trade orders that ultimately $4

Now traders are eyeing key technical levels in bitcoin that could help assess the direction of trend for the $4 going forward.

Bitcoin had confirmed $4 on Monday with consecutive daily closes above that level. But Tuesday's plunge creates the potential for a failed breakout that could lead to more downside if key support levels aren't held.

Those support levels include a cluster of moving averages that are all converging between $43,000 and $46,000. The 50-day moving average currently sits around $44,400, the 200-day moving average currently sits around $46,000, and the 10-week moving average is near $43,000.

Finally, a horizontal resistance level around $47,000 is coming into play as it was previously held as support amid bitcoin's rally to a high of $65,000 in the first few months of 2021. In technical analysis, an often-followed rule is that old support becomes new resistance. With $4 currently trading at $46,247 at time of publication, that level is proving to be resistance while the moving average cluster is acting as support.

According to technical analyst Katie Stockton of $4, the long-term outlook remains bullish for bitcoin even amid recent choppiness.

"The long-term outlook remains bullish, supported by an upward sloping 200-day moving average," Stockton explained in a note on Tuesday, adding that long-term momentum remains positive.

Accordingly, if bitcoin retakes the key resistance level of $51,000, Stockton believes a surge to its previous high of about $65,000 is in order. But a continued breakdown in bitcoin below both $47,000 and the cluster of moving averages would signal a leg lower to about $40,000, with further support levels found in the $30,000 range.