3 - 5 minute read
Bitcoin’s recent decline has caught the attention of market analysts, who are now looking to the cryptocurrency’s 50-day simple moving average (SMA) for potential signals about the next move. At press time, Bitcoin was trading at $27,400, down 11% from its ten-month high of $31,000 on April 14, according to CoinDesk data. The 50-day SMA is currently at $27,244, and if it is violated, it could challenge the bullish market sentiment, according to Alex Kuptsikevich, senior market analyst at FxPro.
“The market has erased its previous growth momentum and is now testing the strength of the medium-term uptrend in the form of the 50-day moving average,” said Kuptsikevich. “A break below this would call into question the bull market’s strength, while a consolidation below $26,600 could be the prologue to a more profound decline.” The 50-day SMA is one of the most widely-tracked technical lines in traditional markets and cryptocurrencies.
If the breakdown of the 50-day SMA happens, the next support level would be at $25,200, which was the level that capped the upside between August 2022 and February 2023, as seen in the weekly chart above. Katie Stockton, founder and managing partner at Fairlead Strategies, warns that the SMA support may be fleeting and could soon pave the way to a deeper decline.
“Bitcoin is testing the 50-day SMA, a minor level where short-term oversold conditions should generate a brief pause before bitcoin resumes lower toward key support (~$25,200),” said Stockton. Oversold conditions illustrate a notable and consistent downward move in price over a specified period of time without much pullback. Technical analysts use indicators like the relative strength index and stochastic to gauge overbought/oversold conditions over different time frame charts (daily, weekly, hourly).
However, if the SMA continues to hold ground, a new leg higher consistent with the broader bullish outlook will likely resume. “The recent breakout [March move above $25,200] and positive weekly MACD support a bullish intermediate-term bias, with next major resistance near $35,900,” noted Stockton.
As Bitcoin comes under pressure amid weakness in technology stocks and an uptick in bond yields, traders should keep a close eye on the 50-day SMA and potential violations of this key average. A breakdown below the 50-day SMA could indicate a deeper decline, while continued support could lead to a new leg higher. Ultimately, traders should use caution and consider technical indicators to make informed decisions about their investment strategies.
