Bitcoin is facing an additional drop of 23% from current levels after breaching a key resistance level

• Bitcoin's fall below its 50-day moving average could signal more downside ahead, according to technical analyst Katie Stockton of Fairlead Strategies.
• A decisive break below the key technical level would signal a potential 23% sell-off to $42,000, Stockton said in a Monday note.
• Bitcoin fell 17% over the weekend, staging its biggest daily decline since February.
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Bitcoin's decline of 17% over the weekend could set it up for further downside if a key technical support level is decisively breached, according to a Monday note from technical analyst Katie Stockton of Fairlead Strategies.

Stockton is closely monitoring bitcoin's 50-day moving average and 10-week moving average, which sits at $56,496 and $55,555 as of Monday afternoon, respectively. Those technical levels are above bitcoin's current price of $54,758.

Consecutive daily closes below the moving averages would signal to Stockton that bitcoin could continue falling to its next support level around $42,000, which would represent a decline of 23% from current levels, and a decline of 35% from bitcoin's all-time-high of more than $64,000 reached last week.

"The 50-day (~10-week) MA is being tested, and we believe consecutive closes below it would increase risk of a test of support near $42,000," Stockton said.

Moving averages are a lagging trend-following indicator that technical analysts use to smooth out price movements and help identify the direction of the trend in place.

Traders often view the the 50-day moving average, which is the average daily closing price of a security over its previous 50 trading sessions, as a short-term moving average that often represents areas of support or resistance.

In a previous note, Stockton had highlighted bitcoin's recent breakout as generating a measured move price target of $69,000 for the cryptocurrency. Bitcoin's recent weakness does not invalidate that upside price target, according to the note.

"The pullback does not negate the breakout, but it suggests tha its targeted level [$69,000] may take longer to achieve," Stockton explained, adding that despite the short-term pullback, bitcoin's long-term momentum "remains strong."