Bitcoin succumbed to downside pressure over the weekend with a gruelling sell-off that saw it drop to as low as $42,200.
The move to the downside was triggered by a series of tweets by Tesla CEO Elon Musk, who alluded to the fact that Tesla may sell its Bitcoin holdings before next quarter.
He later added clarity by stating that “Tesla has not sold any more of its Bitcoin”, although the impact of his original comments are potentially devestating for the asset class in the medium to long term.
Bitcoin was saved by the daily 200 exponential moving average, which provided momentary restbite with a bounce up to around $45,000.
The 200 EMA has not been tested since it was broken to the upside in April of last year, with the entire bull market trading well above the technical level of support.
However, as cryptocurrency hype continues to subside following last month’s listing of Coinbase on Nasdaq, many are questioning whether Bitcoin has now started its transition into a bear market.
It’s worth noting that even during the most aggressive bull markets in Bitcoin’s history, corrections of more than 30% are fairly common, with it dropping from $40,000 to $27,000 in January before making a new all-time high in February.
Despite the fact that Bitcoin has now formed consecutive lower highs and low lows, it is still too early to call a bear market considering its ability to surge from 30% corrections in the past.
In order to regain a bullish posture it needs to begin trading back above the psychological level at $50,000, as well as the key point of resistance at $53,000.
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