Bitcoin stalls at key $10,000 resistance level, but has significant upside if it can break through
- Technically speaking,
bitcoinhas stalled at a key resistance level: $10,000.
cryptocurrencyhad been widely expected to break higher in anticipation of a halving, which occurs every four years and is when cryptominers' bitcoin payout is cut in half.
- Despite bitcoin's recent sell-off, the cryptocurrency could see significant upside if it eventually breaks through the $10,000 price level.
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Technically speaking, bitcoin has stalled at a key resistance level: $10,000.
The cryptocurrency had been widely expected to break higher in anticipation of a halving, but instead it sold off.
A typical "sell the news" event.
A halving in bitcoin occurs every four years, and is when crypto miners' bitcoin payout is cut in half, limiting the supply of new bitcoin that is coming into the market.
There's another set of investors who trade bitcoin not because of fundamentals, but because of technicals.
Looking at bitcoin, classical technical patterns are playing out that help provide a roadmap as to where bitcoin may trade in the future if certain price points are hit.
The elephant in the room is the $10,000 price level, which is currently acting as both a psychological and historical resistance level for bitcoin.
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In technical analysis, large round numbers are defined as "psychological resistance levels," like $10,000 for bitcoin or 3,000 for the S&P 500.
Historical resistance levels are price points that have in the past acted as support or resistance. For bitcoin, $10,000 acted as resistance in late 2018, throughout the middle of 2019, and earlier this year.
If bitcoin is decisively rejected at the $10,000 level once again, downside support levels technical analysts will be watching are $8,000, $6,0000, and $4,000, representing potential drawdowns of 15%, 36%, and 58%, respectively.
Alternatively, if bitcoin manages to decisively break through $10,000, technical analysts will expect bitcoin to trade to its previous resistance levels, which are $12,000 and $14,000, representing potential upside of 26% and 47%, respectively.
Katie Stockton, founder and managing partner of Fairlead Strategies, has bitcoin on her radar.
Specifically, Stockton is closely watching the $10,055 level, which represents the key 61.8% Fibonacci retracement level.
In an e-mail exchange with Business Insider, Stockton said:
"A breakout above that level would target the 2019 high ($13,852), so would be a major bullish development for bitcoin. Intermediate-term momentum is positive, and there seems to be a growing appetite for risk in the broader market, supporting an eventual breakout."
Still, short-term gauges on bitcoin are neutral, according to Stockton, and she does note that previous bitcoin halvings were initially met with choppiness before experiencing sustained moves to the upside.
Bitcoin traded down 2% to $9,520 Wednesday afternoon.
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