Bitcoin is setting up for a short-term downturn that could see it dramatically drop its recent gains, even if the long-term outlook looks good for the world’s No. 1 cryptocurrency.
That is the opinion of some analysts after the price of bitcoin
breached a key technical level following the massive growth in digital assets following the growth of Coinbase Global
listed on Nasdaq last week.
Bitcoin was down 1.8% late Wednesday morning in New York, changing hands at around $ 56,000 on CoinDesk. That puts the cryptocurrency about 14% lower than its all-time high of $ 64,829.14.
On Tuesday, researchers at Bespoke Investment Group noted that Tuesday marked the first time bitcoin, in a 24-hour period, in which it fell below its 50-day moving average since at least five. 2014, after recording 193 consecutive days printed above that level. Bitcoin was first created in 2008-09.
Market technicians use moving averages as a measure of bullish and bearish trends in an asset.
Pankaj Balani, CEO of Delta Exchange, in email comments, said that bitcoin tried to hold above its 50-day moving average in recent trading but warns that a constant price violation Short term may result in a slide down to around $ 40,000.
“50 DMA has been a key support for Bitcoin since October of last year and it has held this support level at all times during this rally. Around this time, however, we see Bitcoin’s momentum exploding and BTC is struggling to hold this support level, ”explains Balani.
Bespoke researchers note that bitcoin tends to decline, over a period of one week, one month, three months, after an uptrend lasting at least 100 days has been blocked.
“A week later, [bitcoin] fell all four times with an average drop of 4.6% and down all four times. One and three months later, performance was even worse with an average drop of 6.5% and 13.4%, respectively, ”the report reads.
Researchers at JPMorgan Chase & Co.
including Nikolaos Panigirtzoglou, wrote in a report Tuesday that bitcoin’s weakening momentum could send volatile assets down a spiral. The failure to regain $ 60,000 could be the cause of the sharp drop, analysts say.
The JPMorgan strategist points to the bearish trend in the bitcoin futures market
where institutional and professional investors seek to protect their risk against cryptocurrencies.
Referring to the attached chart, JPMorgan said that four more than 10% declines in their futures position authorization, including those over the past few days, were attributed to the inability of a trend higher.
“Similar to the previous three episodes, it is likely that the momentum traders, for example [commodity trading advisors] and crypto funds, at least partly behind an accumulation of long bitcoin futures contracts in recent weeks and therefore also potentially behind the run-off in the past few days, ”JPMorgan concluded. Comment.
If bitcoin’s price does not rise above $ 60,000 soon, the momentum signals shown in Figure 9 will naturally diminish from here over a few months, with their still high levels, the analysts wrote. “Wrote analysts.
JPMorgan researchers are not 100% certain that this time bitcoin will follow the drop with sharp gains back higher as seen in November and mid-February. Notably, analysts say that The flow into bitcoin has become quiet and the downturn appears to be accumulating steam.
So far, the price of bitcoin this year has risen sharply, up 94% year-on-year. For comparison, gold
which is considered a rival of bitcoin, fell 5.5% by 2021. Dow Jones Industrial Average Index
and the S&P 500 index
are both up about 11% year to date.