Bitcoin climbs 5% above a key technical level that could suggest further upside ahead
- Bitcoin jumped as much as 5% on Monday, helping it clear a key technical resistance level.
- The cryptocurrency jumped above its 200-day moving average for the first time since May.
- The move higher sets bitcoin up for a test of its next resistance level near $51,000.
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Bitcoin jumped as much as 5% above $46,000 on Monday, helping it clear a key technical resistance level that signals the potential for more upside ahead.
The popular cryptocurrency jumped above its 200-day moving average for the first time since mid-May, which is often viewed as a key level of support or resistance among technical analysts and traders.
Bitcoin's move higher is viewed as constructive after it staged a false breakdown below the closely watched support level of $30,000 last month. Additionally, the move higher in bitcoin amid a regulatory and legislative "assault" by China and the US represents a big risk-on signal, according to Fundstrat's Tom Lee.
Lee was likely referring to China's crackdown on bitcoin mining, as well as an amendment in the bipartisan infrastructure bill that would broaden the designation of brokers in the crypto space.
"You always buy bitcoin when it breaks above its 200-day moving average," Fundstrat's Tom Lee told CNBC on Monday, calling it a key rule of trading bitcoin. According to Lee, bitcoin averages a six-month return of almost 180% after it breaks above its 200-day moving average.
Going forward, the upside momentum in bitcoin should set it up for another test of resistance near $51,000, which represents a key fibonacci retracement level, according to Fairlead Strategies' Katie Stockton. That represents potential upside of 11% from current levels.
But Lee thinks bitcoin can go even higher before year-end, arguing that a move to $100,000 is reasonable for the popular cryptocurrency. "$100,000 into year-end is actually pretty reasonable [for bitcoin]," he concluded.
While bitcoin's move above its 200-day moving average is constructive for further gains, technical analysts will be looking for confirmation of the move, signaled by consecutive daily closes above that key level.
