Being in economic trouble, Bitcoin’s crash since May has pushed it below its 200-week moving average of around $ 22,600 and its 200-day moving average of around $ 35,500.
It has now been relatively stable for over a month and is trading close to the 200-week moving average. Valkyrie Investments, for example, says its research points to a hike, but it’s unclear when.
“Historically, we have been copying (around the 200-week moving average) for three to six months,” said Josh Olszewicz, head of research at Valkyrie, referring to the side trading period before the highest breakout.
Between late 2018 and early 2019, Bitcoin surpassed its 200-week moving average for nearly three months. However, in a darker scenario, Bitcoin may not recover for about a year, Olszewicz added.
Moving averages smooth out wild price swings to sharpen the signal, or at least that’s the idea. Traders use moving averages to find the closest support or resistance levels.
However, chart analysis based on historical price models is far from an exact science, especially when it comes to the young, fast and bold history of cryptocurrencies.
Other technical indicators point to a wide range of possible support levels for Bitcoin, ranging from $ 20,000 to $ 12,000, suggesting that the world’s largest cryptocurrency could see another breakout.
Bitcoin is just above its 2017 peak this week, but is more than 68% below the all-time high of $ 69,000 set last November.
two levels below and one above
Some see a trend in the recent slump. “The market is in a declining channel that started in May,” said Eddie Tofpik, head of technical analysis at ADM Investor Services International. “It looks like a pattern of four steps down, one more right now.”
Fibonacci retracement patterns designed to identify support and resistance levels suggest that Bitcoin has found moderate support between $ 19,500 and $ 20,000, said Patrick Reid, co-founder of FX advisory firm Adamis Principle.
Valkyrie’s Olszewicz is aiming for $ 12,000 as the next support, a level Bitcoin hasn’t seen in nearly two years. In the absence of fundamentals, technical analysis has proved useful in identifying some long-term trading patterns for cryptocurrencies such as bitcoin.
For example, on December 10, the famous “death cross” chart predicted the subsequent collapse of Bitcoin. At the beginning of January, the 200-day moving average proved to be a major resistance.
These methods also present dangers, as demonstrated this year when the implosion of the stablecoin TerraUSD and its counterpart Eton Luna, and then the hedge fund Three Arrows Capital, caused all cryptocurrencies to collapse.
According to research firm CryptoCompare, cryptocurrency spot trading on major exchanges fell 27.5% in June to $ 1.41 trillion, the lowest level since December 2020.
“Trust has largely collapsed,” Reid said of Adamis Principle.