Technical indicator points to Bitcoin price bounce
|A lesser-tracked technical analysis indicator is signaling good times ahead for bitcoin.
-
The cryptocurrency's 10-week simple moving average (SMA) is about to dip below the 50-week SMA, confirming a so-called bearish crossover.
-
Historically, the negative signal has proven to be a contrary indicator, marking interim price bottoms and the end of bear markets, as feature image shows.
-
The previous bearish cross dated mid-March 2020 occurred after bitcoin's coronavirus-induced crash to $4,000. Bitcoin picked up in the subsequent months, setting record highs above $20,000 by December.
-
Similarly, bitcoin bottomed out and rebounded at least 25% following the confirmation of the negative crossovers in early January 2020 and mid-June 2018.
-
Moving averages are based on backward-looking data. Thus, on weekly and monthly charts, bearish and bullish crossovers can be taken to represent oversold or overbought conditions and the potential for price bounce and bull market corrections.
-
That said, technical studies are unreliable as standalone indicators and seasoned traders prefer to read chart-based signals with money flow and fundamentals, which are currently signaling a low probability of a significant price bounce.
-
Bitcoin suffered a deeper drop following the confirmation of the first bear cross between 10- and 50-week MAs seen in September 2014.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.