Cryptoverse – Hold your breath for a bitcoin bounce

A representation of the virtual cryptocurrency Bitcoin is seen in this image illustration taken on October 19, 2021. REUTERS / Edgar Su

July 19 (Reuters) – If you are waiting for a bitcoin recovery, you may have to sweat for several months. That is the conclusion of some technical specialists who seek method from the madness.

Bitcoin’s crash since May, flooded by economic anxiety, has hit it below its 200-week moving average of around $ 22,600, as well as its 200-day moving average of around $ 35,500.

It has now been moving relatively sideways for more than a month, hovering close to the 200-week moving average.

Valkyrie Investments, for one, says that their research points to an upside movement – but that it is not clear when.

“Historically, we have accumulated (around 200-week average) for three to six months,” said Josh Olszewicz, Valkyrie’s head of research, referring to a period of sideways trading before an upward price break.

Between the end of 2018 and the beginning of 2019, bitcoin spent almost three months on the 200-week moving average.

In a gloomier scenario, however, bitcoin may not rally in about a year, Olszewicz added.

Moving averages smooth out wild price fluctuations to clean up the signal, or at least that’s the idea. Traders use longer dated averages to find the next levels of support or resistance.

Nevertheless, chart analysis based on historical price patterns is far from an exact science, especially when it comes to the young, fast and furious history of crypto.

Some other technical indicators signal a wide range of potential levels of support for bitcoin, from $ 20,000 to $ 12,000 – suggesting that the world’s largest cryptocurrency may plummet again.

This week, bitcoin cruises just above the 2017 peak, but is over 68% below the all-time high of $ 69,000 hit in November last year.

‘FOUR STEPS DOWN, ONE UP’

Some see a pattern in the recent decline.

“The market is in a bear channel that started back in May,” said Eddie Tofpik, head of technical analysis at ADM Investor Services International. “It looks like it’s in four step down and one step up mode at the moment.”

Fibonacci retracement patterns, which aim to identify levels of support and resistance, suggest that bitcoin has found a moderate level of support between $ 19,500 and $ 20,000, said Patrick Reid, co-founder of FX consulting firm Adamis Principle.

Olszewicz at Valkyrie points to $ 12,000, a level bitcoin has not touched in almost two years, as the next support.

In the absence of basic drivers, technical analysis has proved useful in identifying some long-term trading patterns for cryptocurrencies such as bitcoin.

For example, a well-known “death-cross” chart pattern on December 10th predicted the bitcoin crash that followed. In early January, the 200-day moving average showed strong resistance.

Such methods also come with dangers, which were proven this year when the implosion of the stablecoin TerraUSD and its linked token Luna and the later hedge fund Three Arrows Capital caused a crash in all cryptocurrencies.

Spot trading of cryptocurrencies on major stock exchanges fell 27.5% in June to $ 1.41 trillion, the lowest level since December 2020, according to data from research firm CryptoCompare.

“Trust has come out of the market in a big way,” said Reid at the Adamis Principle.

Reporting by Lisa Pauline Mattackal and Medha Singh in Bengaluru; Editing Vidya Ranganathan and Pravin Char

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