There is mounting technical evidence that the $3,200 – $3,300 level in Bitcoin (BTC) is a major pivot point. If Bitcoin (BTC) holds $3,200, that could lead to stability. We do not expect that, but it is possible. On the other hand, if Bitcoin (BTC) falls below $3,200, that could lead to a move to $2,500.
Looking at the Bitcoin (BTC) weekly chart (Figure 1), we find the 200-week moving average at $3,300. That level is important because the 200-week moving average shows the average price of Bitcoin (BTC) over roughly the last four years. So if Bitcoin (BTC) is below that level, it could be an indication that stress in the crypto space is increasing. This may favor short sellers. Bears may be free to push prices lower, knowing that people may continue to sell Bitcoin (BTC) before the end of the year for the crystallization of tax losses.
$3,300 is also a big level using Gann analysis. A set of Gann lines on the Bitcoin (BTC) weekly chart shows a break of $3,300 could lead to a move to the next Gann line at $2,300.
Fibonacci circle analysis of Bitcoin (BTC) shows a similar read. A break of $3,200 could lead to a move to $2,600 (Figure 2).
Why Would a Move in Bitcoin (BTC) to Around $2,500 be Important?
After showing these charts to the Crypto.IQ trading unit, we received important feedback. $2,500 may be approaching the Bitcoin (BTC) cost of production. As in any commodity like oil and gold, Bitcoin has a cost to produce or mine. Producers obviously need the price they receive to be above the current market price in order to remain viable.
If Bitcoin (BTC) miners perceive that the Bitcoin (BTC) price may move to the cost of production, miners may start selling inventory at a more rapid pace. They may also use derivatives to hedge the Bitcoin (BTC) they will produce in the future. The Crypto.IQ analysis group is well educated on how these derivatives work.
Figure 3 shows where the Bitcoin (BTC) cost of production is for various types of mining hardware. Even the threat or idea of Bitcoin (BTC) approaching a level like $2,500 or $2,000 must be keeping miners up at night.
Bottom Line: A break in Bitcoin (BTC) below $3,200 could start another fast wave of selling. The Crypto.IQ trading desk and analysis group will continue to watch this level closely.