Earlier this week, Bitcoin was trading at a significant discount to its long-term moving average, implying excessive bearish movement and potential for an upward reversal.
The cryptocurrency fell to nearly $ 30,000 on Tuesday, bringing the ratio to the 20-week simple moving average (SMA) down to 0.61, the lowest level since the March 2020 crash.
Historically, Bitcoin has hit major price lows with a ratio of around 0.60.
“Our chart shows bitcoin at its biggest discount to its 20-week moving average since its low in March 2020 at around $ 4,000,” Bloomberg’s Mike McGlone said in a research note published June 9. less, closer to $ 3,000. “
If past data is a guideline, Tuesday’s low of around $ 30,000 could also be a bear market bottom. Bitcoin has rebounded slightly over the past three days to nearly $ 37,000, but remains well below its 200-day SMA at $ 42,000.
According to McGlone, sentiment has become too bearish, which is often seen at the bottom of the market.
“Calls for $ 20,000 and technical models such as death crosses often encourage more fundamentally focused, long-term bulls to become responsive buyers,” McGlone said.
The death cross, or bearish crossover of the 50-day and 200-day SMA, is widely used to indicate a long-term bearish momentum shift. Bitcoin’s 50-day SMA is trending south and looks set to break below the 200-day line in the next few days.
Some analysts fear that this could lead to more serious losses. However, these indicators often catch traders on the wrong side of the market as they are based on past data and tend to lag behind prices.
In other words, by the time the crossover occurs, the asset is already oversold and ready to bounce. The last two death cross cases, March 2020 and October 2019, turned out to be bear traps.
Blockchain data shows that large investors continue to hoard coins despite recent measures to suppress crypto mining in China or fears of cross-death.
McGlone remains optimistic about Bitcoin’s long-term price outlook. “The early days of price openings, plus the massive adoption and inevitability of US ETFs, keep the $ 100,000 resistance on our radar,” McGlone said.