Will Bitcoin suffer from a long-term bear market?

Crypto markets showed a sluggish pattern last week, with some dire predictions for the medium-term future given by analysts. Investors are worried about the rise in interest rates and general negative sentiment about the economy. Bitcoin is also suffering and does not seem ready for a bullish breakout. The flagship cryptocurrency is seeing a “death cross”, as chart patterns indicate that a short-term moving average has fallen below a long-term moving average. As of this writing, Bitcoin is in the green zone, hovering around $20,000.

Bitcoin’s 20-week MA goes below the 200-week MA

For the first time in Bitcoin’s history, the cryptocurrency’s 20-week moving average dipped below its 200-week moving average. This means a death cross, which occurs when the slower moving average crosses above the faster moving average, usually indicates a bearish market.

In case you’re not familiar, a moving average is simply a technical indicator that smooths out price data by creating a constantly updated average price. They often form the basis of other technical indicators, such as moving average convergence divergence (MACD).

Bitcoin does not often come close to its 200-week moving average, and the fact that the price is flat there is a rare event. Usually, when this level was reached, it was followed by a period of strong price increases.

This time, however, could be different. Not only has Bitcoin failed to hold the level, closing below it for more than ten weekly candles, it also failed to break past it last month.

Could Bitcoin no longer be a hedge against inflation?

There has been some speculation about the whole incident, with analysts pointing to the fact that the crypto market is now much more closely tied to the S&P 500. This is a point that has become a much stronger part of the narrative as the crypto market has become more mainstream and behaves like the stock market.

Bitcoin and other assets used to be seen as something separate from other asset classes, and as such were thought of as good assets to help hedge against inflation. That no longer seems to be the case.

It is uncertain whether this pattern will hold and Bitcoin will consolidate around its current levels. The crypto market is certainly experiencing an unusually unpredictable time, even by its standards. Many expected the latter half of 2022 to be strong, but macroeconomic conditions have resulted in an uncertain immediate future.

The bottom line

The coming months will be important for Bitcoin as it tests current levels and proves if it can break out of its current rut. The technical indicators may show that it is experiencing an uncertain period, but the asset is breaking into the mainstream, so some of its previous patterns may not hold as true as before.