Bitcoin is gearing up for a short-term downturn, which could see it lose much of its recent gains, even if the longer-term outlook looks healthy for the world’s No. 1 crypto.
That’s the view of some analysts after bitcoin prices BTCUSD,
has passed a significant technical level following the exuberance for digital assets in the wake of Coinbase Global’s COIN,
listing last week on the Nasdaq.
Bitcoin was down 1.8% in New York late Wednesday morning, switching hands on CoinDesk by about $ 56,000. That puts the crypto about 14% below its all-time high of $ 64,829.14.
On Tuesday, researchers at Bespoke Investment Group noted that Tuesday marked bitcoin’s first time, in a 24-hour period, in which it fell below the 50-day moving average since at least 2014, after having 193 consecutive days of prints above that level. included. Bitcoin was first created in 2008-09.
Market technicians use moving averages as barometers of bullish and bearish trends in assets.
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Pankaj Balani, CEO of Delta Exchange, said in email comments that bitcoin has managed to stay above its 50-day moving average in recent trading, but warned that a continued short-term price violation could lead to a decline up to about $ 40,000.
The “50 DMA has been a crucial support for Bitcoin since October last year, and it has maintained this support every time in this rally. This time, however, we see Bitcoin’s momentum fading away and BTC is struggling to hold onto this support, ”explained Balani.
The Bespoke researchers noted that bitcoin tends to see declines, in the one-week, one-month, three-month periods, after breaking upward trends of at least 100 days.
“A week later, [bitcoin] was all four-fold for a median decrease of 4.6% and all four-fold. One and three months later, performance was even worse with median reductions of 6.5% and 13.4%, respectively, ”the report said.
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Researchers at JPMorgan Chase & Co. JPM,
including Nikolaos Panigirtzoglou, wrote in a Tuesday report that waning momentum for bitcoin could spiral lower for volatile assets. The analysts said a failure to recapture $ 60,000 could be the trigger for a sharp drop.
The JPMorgan strategist points to bearish trends in bitcoin futures markets BTC.1,
where institutional and professional investors go to hedge their exposure to the crypto.
JPMorgan’s Figure 9 bitcoin chart
Referring to the accompanying chart, JPMorgan says the four episodes of more than 10% decline in their futures position proxy, including those from the past few days, have been attributed to an inability to move higher.
As with the previous three episodes, it is likely that momentum traders like [commodity trading advisors] and crypto funds, were at least partially behind the build-up of long bitcoin futures in recent weeks and thus likely behind the settlement of the past few days, ”concluded JPMorgan.
“If the bitcoin price does not quickly rise above USD 60,000, the momentum signals shown in Figure 9 will naturally decline for several months from here, given their still high level,” the analysts wrote.
JPMorgan researchers are not 100% sure that bitcoin will follow a decline this time around with a sharp drop higher, as seen in November and mid-February. Notably, the analysts say flows to bitcoin have been lukewarm and the downturn appears to be gaining momentum.
So far, bitcoin prices have been good this year, up 94% so far. For comparison: gold GC00,
seen as a rival to bitcoin, is down 5.5% in 2021. The Dow Jones Industrial Average DJIA,
and the S&P 500 index SPX,
are both up about 11% so far.