By Paul Spirgel

(Reuters) - Bitcoin has lost half its value since hitting an all-time high in October, and the cryptocurrency's tailspin could deepen if it falls convincingly through ​important levels it has been circling in recent days.

A line chart showing bitcoin tumbling, approaching key levels

Bitcoin's troubles have coincided with ‌increased market exuberance over AI stocks and a series of glittering upcoming listings such as SpaceX that have lured capital away from the world's largest cryptocurrency.

The losses have left bitcoin hovering near $60,000, what technical ​analysts consider a "psychological level" — a big round number that leads traders to pause before ​crossing. Falling through psychological levels can lead to intensified selling. But tests ⁠of such levels can also attract bargain hunters attempting to time the next upswing.

This ​is what happened in February, when bitcoin fell to $60,008.52. Buyers jumped in, producing what turned ​out to be a dead-cat bounce, a mild and temporary recovery from prolonged selling.

The significance of the $60,000 level will be enhanced by the support it provided in February and its proximity to the 200-week moving ​average, which is at $61,778. However, the failure of its recovery attempts in recent months ​will also bolster sentiment among bears convinced that $60,000 will eventually fall.

If bitcoin falls through there convincingly — trading ‌below $60,000 for ⁠three days, for example, with lower lows and highs — traders are likely to start targeting the next psychological level, $50,000. That level coincides roughly with bitcoin's low for August 2024, around $49,445, according to data supplied by LSEG, bolstering its importance as a goal for sellers as ​well as a potential ​point of support.

To ⁠turn bitcoin sentiment positive, any attempt at recovery will need to surpass the 30-day moving average at $75,685 and the 200-day moving average at $78,840. ​Traders use moving averages to strip out price extremes and gain ​a clearer ⁠view of a trend. Bitcoin's last attempted recovery stopped at the 200-day moving average in May.

What the chart shows:

(Daily markets commentary from Reuters analysts on the signals ​financial charts are sending - and what they might mean.)

Paul Spirgel is a Reuters ​market analyst. The views expressed are his own. Editing by Burton Frierson and Rod Nickel

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