Bitcoin rebounds to about $83,700 after stop-loss selling drags it to $81,000
In brief
- Bitcoin fell to $81,000 on Tuesday on stop-loss selling, according to CoinDesk.
- Bitcoin's drop brought it back to its 50-day moving average.
- Buyers lifted bitcoin to about $83,700, defending the same level held last Thursday.
- FxPro's Alex Kuptsikevich sees a possible move to $85,000 and a retest of $87,000.
Stop-loss selling and the 50-day line
CoinDesk put Tuesday's drop down to a burst of stop-loss selling. Stop-loss orders are automatic sell orders that traders set to limit their losses. When a lot of them trigger at once, they can push the price down quickly (which is the mechanism CoinDesk described for Tuesday's move).
That selling took bitcoin back to its 50-day moving average. It's simply bitcoin's average closing price over the past 50 days, and traders watch it as a guide to the medium-term trend.
It held.
A level buyers keep defending
Buyers defended the 50-day moving average on Tuesday, according to CoinDesk, just as they did on Thursday when bitcoin bottomed near $80,400. From Tuesday's $81,000 low, the price climbed back to about $83,700.
Two tests of the same line, two bounces. Buyers have now defended the level twice since Thursday, according to CoinDesk.
FxPro's read on the bounce
The rebound shows “just how easily it can rise after long positions have been liquidated,” said Alex Kuptsikevich, chief market analyst at FxPro.
Kuptsikevich went further than that. In his view, if Tuesday's drop turns out to be a healthy correction, bitcoin could move quickly to $85,000 and retest $87,000 (the top of the range it traded in last week). That's his forecast, not a given, and it rests on the "healthy correction" condition he attached to it.
He also said the speed of the reversal might point to a broader return of appetite for risk. He didn't want to make that call on bitcoin alone, though. Kuptsikevich said he wants to see it confirmed in other markets before reading too much into one quick bounce off a moving average.
So what does that leave traders with? A support level that's held twice in less than a week, a clear upside target from one analyst, and a caveat from that same analyst that the broader risk picture hasn't confirmed anything yet.
Frequently asked questions
What caused bitcoin to drop to $81,000 on Tuesday?
CoinDesk attributed the drop to a burst of stop-loss selling. Stop-loss orders are automatic sell orders traders set to limit losses, and when many trigger at once they can push the price down quickly. The selling took bitcoin back to its 50-day moving average before buyers lifted it to about $83,700.
What is bitcoin's 50-day moving average and why do traders watch it?
The 50-day moving average is bitcoin's average closing price over the past 50 days. Traders watch it as a guide to the medium-term trend. Buyers defended the level on Tuesday and also on the previous Thursday, when bitcoin bottomed near $80,400, according to CoinDesk.
Where does FxPro's analyst think bitcoin could go next?
FxPro chief market analyst Alex Kuptsikevich said that if Tuesday's drop proves to be a healthy correction, bitcoin could move quickly to $85,000 and retest $87,000, the top of last week's trading range. He said the speed of the reversal might signal a broader return of risk appetite, but wants to see that confirmed in other markets.
