Cryptoverse: Holding Your Breath for a Bitcoin Bounce


July 19 (Reuters) – If you wait for Bitcoin to recover, you may have to sweat for months. That’s the conclusion of some techies looking for a method to the madness.

Bitcoin’s slide since May, fueled by economic anxiety, has knocked it below its 200-week moving average at around $22,600, as well as its 200-day moving average around $35,500.

It has now been moving relatively sideways for over a month, hovering near the 200-week moving average.

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For one thing, Valkyrie Investments says its research points to an upward movement — but it’s not clear when.

“Historically, we’ve built up (around the 200-week average) for three to six months,” said Josh Olshewicz, Valkyrie’s head of research, referring to a period of sideways trading before a price breakout to the upside.

Between late 2018 and early 2019, Bitcoin spent nearly three months within the 200-week moving average.

In a more bleak scenario, however, bitcoin may not rally for a year or so, Olszewicz added.

Moving averages smooth out wild price swings to clear the signal, or at least that’s the idea. Traders use longer-term averages to find the next levels of support or resistance.

Still, chart analysis based on historical price patterns is far from an exact science, especially when it comes to crypto’s young, fast and furious history.

Some other technical indicators are signaling a wide range of potential support levels for Bitcoin, ranging from $20,000 to $12,000 – suggesting that the world’s largest cryptocurrency could dip again.

Bitcoin is hovering just above its 2017 peak this week, but is more than 68% below its all-time high of $69,000 hit last November.

“FOUR STEPS DOWN, ONE UP”

Some see a pattern in the recent decline.

“The market is in a bearish channel that started back in May,” said Eddie Tofpik, head of technical analysis at ADM Investor Services International. “It seems to be in four steps down and one step up mode right now.”

Fibonacci retracement patterns, which aim to identify support and resistance levels, suggest that bitcoin has found a moderate level of support between $19,500 and $20,000, said Patrick Reed, co-founder of FX consultancy Adamis Principle.

Olszewicz at Valkyrie points to $12,000, a level bitcoin hasn’t touched in nearly two years, as the next support.

In the absence of major drivers, technical analysis has proven useful in identifying some long-term trading patterns in cryptocurrencies such as Bitcoin.

For example, a well-known “death cross” chart pattern on December 10 foreshadowed Bitcoin’s subsequent decline. In early January, the 200-day moving average proved to be strong resistance.

Such methods also carry dangers, as was proven this year when the implosion of stablecoin TerraUSD and its companion token Luna, and subsequently hedge fund Three Arrows Capital, caused crashes across all cryptocurrencies.

Spot cryptocurrency trading on major exchanges fell 27.5% in June to $1.41 trillion, the lowest level since December 2020, according to data from research firm CryptoCompare.

“Confidence has gone out of the market in a big way,” Adamis Principle’s Reid said.

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Reporting by Lisa Pauline Mattakal and Medha Singh in Bengaluru; Editing by Vidya Ranganathan and Praveen Char

Our standards: The Thomson Reuters Trust Principles.

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