Bitcoin has been slowly declining this week. The first cryptocurrency by market cap appears to have lost momentum as uncertainty spills over into the cryptocurrency market from legacy markets.
At the time of writing, Bitcoin is trading at $22,600 with a 4% loss in the last 24 hours and a 1.2% loss in the last seven days.
The cryptocurrency lost its 200-day simple moving average (SMA) at $22,800. In the short term, a recovery of this level is critical to maintaining the bullish momentum.
Bulls need to maintain current BTC price levels and move beyond the 200 SMA to prevent the cryptocurrency from retesting previous support levels. Analyst Caleb Franzen has provided the chart below to show how the price of BTC was rejected at a critical level.
The cryptocurrency has managed to reach the top of the channel shown above and now looks set to retest the low at $21,200. This level should act as support to stop the downtrend below $20,000.
Data from Material Indicators (MI) shows over $20 million worth of buy (purchase) orders for bitcoin ranging from $22,200 to $22,400. It remains to be seen if these orders can push back the bears, below these levels the order book looks thin to $19,000.
At the time of writing, $19,000 worth of buy orders stood at $16 million, which should serve as a last line of defense in case bitcoin continues its downtrend. Franzen said the following about the potential for BTC to see further losses in the short term:
Whether you call it a parabolic trendline or a curved trendline is irrelevant to me. Based on what I’ve heard from the analysts who use them, should we be worried about a short-term momentum reversal for Bitcoin? I dont know (…). Markets can swing between the two extremes of sentiment/trend. (…) I think that the magnitude and speed of this movement was too great.
Will bitcoin be different this time?
Another look at bitcoin’s price shows that it is currently trading just above its 200-week moving average (WMA) at $22,300. The cryptocurrency has lost this level just 7 times since its inception, according to Ark Invest analyst Yassin Elmanjra.
As soon as the cryptocurrency recovers this level after a noticeable loss, it often tends to rise. On average, according to Elmanjra, Bitcoin records a 240% gain when this happens.
However, BTC may not immediately follow a similar trajectory, in the meantime, the cryptocurrency may face bearish and sideways price action. Analyst said:
Relatively speaking, if this bear market is as severe as the 2018 bear market, Bitcoin could face an even bigger drop. Bitcoin has corrected 72% from its all-time high. Bitcoin typically finds global cyclical bottoms with over 80% retracements.
Credit : www.newsbtc.com