Bitcoin has recently managed to settle below the psychologically important $40,000 level and moved to multi-month lows amid crypto market sell-off.
Rising Yields Are the Main Driver Behind Bitcoin Weakness
The recent rise in Treasury yields pushed traders out of riskier assets. S&P 500 is already down by 7% from the highs that were reached at the start of this year, and this move highlights the rush out of speculative names with high valuations.
Not surprisingly, the move out of riskier assets put additional pressure on the crypto markets and pushed Bitcoin below $40,000. Other leading cryptocurrencies have also found themselves under significant pressure, highlighting the recent correlation between crypto markets and stock markets.
This is a broad sell-off, and a material improvement in market sentiment is necessary for Bitcoin (or other leading coins) to have a chance to develop sustainable upside momentum. Meanwhile, the technical picture looks bearish as Bitcoin has just moved to the levels that were last seen back in August 2021.
Bitcoin declined below the key support level at $40,000 and is testing the next support at $39,000. In case this test is successful, Bitcoin will move towards the next support level which is located at $37,500. RSI has just moved into the oversold territory, but there is enough room to develop additional downside momentum in case the right catalysts emerge.
A move below the support at $37,500 will open the way to the test of the support at $36,500. If Bitcoin manages to settle below this level, it will head towards the major support level at $35,000.
On the upside, the previous support level at $40,000 will serve as the first resistance level for Bitcoin. In case Bitcoin gets back above this level, it will head towards the next resistance at $41,000. A successful test of this resistance level will push Bitcoin towards the significant resistance level which is located near the 20 EMA at $42,600.