The analyst says another leg down for Bitcoin could bring the $30,000 support level into play.
Bitcoin price fell to lows of $34,800 on Friday to extend its decline that now risks further losses to $30,000.
Currently, the BTC/USD pair is hovering around $34,825, nearly 12% down in 24 hours and just over 20% in the red this past week.
The broader crypto market also remains on track for its worst weekly performance since mid-December. At the time of writing, the total cryptocurrency market cap is at $1.7 trillion after a 14% rout in 24 hours.
All the top 10 largest cryptocurrencies by market cap have logged double-digit losses on the day.
Technical analyst Katie Stockton of Fairlead Strategies told Insider on Friday that breaking below $40,000 could see bulls seek support around $37,361. She said that a breakdown to this “secondary support level” would see the flagship cryptocurrency’s overall decline total 22% from the recent highs to $30,000.
In a note to Insider, Stockton highlighted the area around $37k as one that presented a significant buffer zone. It also characterises the benchmark digital asset’s long-term uptrend line, below which lies the potential for more pain.
But she also noted that a rebound for BTC/USD that leads to a weekly close above $37,361 would likely invalidate the negative outlook. The analyst points to the technical picture that show oversold conditions as one likely to aid a short-term uptick in price movement.
However, things will be tough for bulls if the downturn leads to further rot and turns the highlighted level into a supply wall. According to the analyst, whose forecast came before BTC’s plunge to $35,262, another leg down would signal the start of a fresh bearish reversal.
The bearish run for crypto comes as the stock market also sinks amid increased risk aversion among investors. The drawdown across risky assets has heightened as the market prepares for the first of potentially three or more Federal Reserve interest rate hikes.
On Friday, crypto billionaire and Galaxy Digital CEO Mike Novogratz said that crypto faced a rough time and could potentially only rally once stocks “find a base.” Investors might thus watch the stock market keenly next week even as the Fed’s January meeting takes place.
The Nasdaq closed 2.2% down on Friday, while the S&P 500 and Dow also edged lower by more than 1% to see stocks post another negative week.