Holding your breath for a bitcoin rebound in the cryptoverse

Holding your breath for a bitcoin rebound in the cryptoverse

Holding your breath for a bitcoin rebound in the cryptoverse

(Reuters) You might have to wait months for the price of bitcoin to rebound. That is the conclusion reached by several technological experts looking for order in the chaos.

The economic anxiety-driven decline of Bitcoin since May has caused it to fall below both its 200-week moving average of roughly $22,600 and its 200-day moving average of about $35,500.

It has been trending somewhat sideways over the past month and a half, staying close to the 200-week moving average.

One company, Valkyrie Investments, claims that although it is unclear when, their analysis is pointing to an upward rise.

According to Josh Olszewicz, head of research at Valkyrie, "in the past we've stockpiled (around the 200-week average) for three to six months" before to a price break upwards.

Bitcoin nearly straddled the 200-week moving average for over three months in late 2018 and early 2019.

But in a more pessimistic scenario, Olszewicz noted, bitcoin might not recover for almost a year.

Moving averages, or at least the concept behind them, are supposed to clean up the signal by reducing dramatic price swings. Longer-dated averages are used by traders to identify the next levels of support or resistance.

However, chart analysis based on past price trends is far from being a precise science, especially when it comes to the little but frantic history of cryptocurrencies.

Other technical indications are indicating that bitcoin may be supported at a variety of levels, from $20,000 to $12,000, indicating that the world's largest cryptocurrency may once again fall.

This week, the price of bitcoin is hovering slightly over its 2017 high, although it is still more than 68 percent behind its record high of $69,000 reached in November.

Four steps down and one step up

In the latest decline, some people perceive a trend.

According to Eddie Tofpik, head of technical analysis at ADM Investor Services International, the market is in a bear channel that began in May. "It appears to be in a phase of four steps down and one step up right now."

According to Patrick Reid, co-founder of the FX consultancy the Adamis Principle, Fibonacci retracement patterns, which seek to find support and resistance levels, bitcoin appears to have established a reasonable amount of support between $19,500 and $20,000 at the moment.

The next support, according to Olszewicz at Valkyrie, is $12,000, a price that bitcoin hasn't reached in almost two years.

Technical analysis has been beneficial in identifying some longer-term trading patterns for cryptocurrencies like bitcoin in the absence of fundamental factors.

For instance, on December 10, a well-known "death-cross" chart pattern predicted the subsequent bitcoin crash. The 200-day moving average proved to be a formidable obstacle at the start of January.

Such techniques are risky, as was seen this year when declines in all cryptocurrencies were brought on by the collapse of the stablecoin TerraUSD and its linked token Luna, followed by the collapse of the hedge firm Three Arrows Capital.

According to statistics from research firm CryptoCompare, spot cryptocurrency trade on major exchanges fell 27.5 percent in June to $1.41 trillion, the lowest amount since December 2020.

In a major way, trust has been driven out of the market, according to Reid of Adamis Principle.

(Editing by Vidya Ranganathan and Pravin Char; reporting by Lisa Pauline Mattackal and Medha Singh in Bengaluru)

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