Bitcoin has been slowly trending to the downside over this week. The first cryptocurrency by market cap seems to have lost momentum as uncertainty spills into the crypto market from legacy markets.
At the time of writing, Bitcoin trades at $22,600 with a 4% loss in the last 24 hours and a 1.2% loss over the past seven days.
The cryptocurrency has lost its 200 days simple moving average (SMA) at $22,800. In the short term, recapturing this level is crucial to maintain the bullish momentum.
Bulls need to sustain BTC’s price current levels and push beyond its 200 SMA to prevent the cryptocurrency from re-testing previous support levels. Analyst Caleb Franzen presented the chart below to show how BTC’s price was rejected at a critical level.
The cryptocurrency managed to hit the top of the channel shown above and now seems poised to re-test the lower level at $21,200. This level should operate as support in order to stop a downside trend below $20,000.
Data from Material Indicators (MI) show over $20 million in bid (buy) orders for Bitcoin between $22,200 to $22,400. Remains to be seen if these orders will be able to push the bears back, below those levels, the order book looks thin until $19,000.
At the time of writing, there are $16 million in buying orders at $19,000 which should act as the final line of defense in case Bitcoin continues to trend to the downside. Franzen said the following on BTC’s potential to see further losses in the short term:
Whether you want to call this 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 concerned about short-term momentum reversing for Bitcoin? I don’t know (…). Markets can swing between both extremes of sentiment/trend. (…) I think the magnitude & velocity of this move has been too large.
Will This Time Be Different For Bitcoin?
A different perspective for the price of Bitcoin shows that it is currently trading just above its 200 weekly moving average (WMA) at $22,300. The cryptocurrency has only lost this level 7 times since its inception, said Yassine Elmandjra analyst at Ark Invest.
Once the cryptocurrency has reclaimed this level after a pronounced loss, it often tends to the upside. On average, Elmandjra said, Bitcoin records a 240% increase when this happens.
On a relative basis, if this bear market is as severe as the 2018 bear market, bitcoin could see more downside. Bitcoin has corrected 72% relative to its all-time high. Bitcoin usually finds global cyclical bottoms with a correction greater than 80%.