Bitcoin extended losses from its recent record highs as the token tests a price level closely watched by analysts who use historical charts to predict future movements.
The world’s largest cryptocurrency has been trending downward since peaking around US$42,000 earlier this month. The coin fell as much as 5.7 per cent Tuesday, dropping below US$31,000, and testing its 50-day moving average. A sustained dip below that level could spell trouble for the token.
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“If Bitcoin breaks below and then stays below the 50-day moving average, it should serve as confirmation that the move over the past four months was a speculative blow-off top,” said Michael O’Rourke, chief market strategist at JonesTrading.
Gaining further upward momentum could prove challenging. Investor flows into the US$20 billion Grayscale Bitcoin Trust, the largest exchange-traded crypto product, show signs of slowing. Optimism over institutional adoption has played a large role in catapulting the coin to record highs this year, but a sharp selloff last week raises questions on Bitcoin’s ability to break out higher.
“When you just look at the extent of the increase and you compare it to any other bubble over the last 50 years, it’s well above anything else that we might have called a bubble literally in the last half century,” said David Donabedian, chief investment officer of CIBC Private Wealth Management.
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