Is The Bitcoin Bear Market Overhyped? It Could Be
Let’s start with the usual baseline. The following was a snapshot from the last time I wrote a more considered bitcoin analysis, which was August of last year.
The current snapshot in the bitcoin daily chart below shows the cryptocurrency having broken higher to retest $65,000 successfully before stopping cold at $69,000 and turning downwards.
Looking at the current snapshot above, bitcoin appears to be in a bear market, which started when price peaked around $69,000.
Much has been made of bitcoin trading at six month lows around $35,000, as well as the latest downturn taking place on the back of spillover effects of a prior slump in global equities, pandemic-related uncertainties, perceived rising inflation, and fears of encroaching regulation.
From a technical analysis viewpoint, some would argue the bear market was “confirmed” when the daily 50MA (i.e. the 50-day simple moving average) crossed below the daily 200MA around mid-January, less than two weeks before this article was written.
If I wanted to nitpick that conventional interpretation, I’d argue that the bear market — if I can call it that — may have already started much earlier, specifically in November, when the 50MA crossed the 200MA on the four-hour chart, and those two moving averages had been sloping down ever since, as shown in the bitcoin four-hour chart below.
Coming back to the aforementioned $35,000 level, that so-called six-month low was not even a new low.
Looking at the daily chart again, the support level to beat remains $27,920, as I had pointed out as early as May 2021.
As you can see in the above daily chart, that support was tested twice — once in January 2021, and then between May and July 2021, and in both cases the tests failed and bitcoin resumed its upward trek.
Bitcoin would therefore need to retest the support at $27,920 soon before I, personally, would get too excited.
Before bitcoin even gets to $27,920 — if it ever gets there — bitcoin bulls may want to continue layering their buy orders at the support levels on the way down to that level.
If history is any guide — and traders do so love their historical levels — the current stalling price action indicates that bitcoin is not going to break convincingly below $35,000 anytime soon.
But if it does, we can be sure there will be ready buyers around each support level on the way down.
For more information on how I draw the support/resistance levels in the above charts, do refer to the last two articles I wrote on Medium, here and here.
All displayed chart support/resistance lines are either historical levels or actual confirmed order book levels currently being traded by major players based on available market intelligence.
This content is for educational purposes only. It does not constitute trading or investment advice. Past performance does not indicate future results. Do not invest more than you can afford to lose.
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