At the time of writing, the bitcoin price has fallen by 2.2% compared to 24 hours ago. Bitcoin is now trading for 21,500 euros and that is a crucial point. Why? We explain that to you on the basis of some magical lines in our latest technical analysis.
Bitcoin on top of the daily average
In the graph below we see two lines. We start with the orange line, which is the moving average of the last 50 days (50MA), this indicator shows the trend in the medium term. At the moment, the price falls exactly on the 50MA.
The 50MA has been acting as a strong resistance all week, today marks the fourth time in the past six days that the price has attempted to dip below. But every time bitcoin threatens to fall further, the price bounces back slightly.
If the bitcoin price manages to close below 50MA at the end of the day, this is usually interpreted by analysts as a signal of a further downward trend.
Bitcoin has a big safety net
But luckily, bitcoin has a price history that runs longer than The Walking Dead. The blue line looks at the moving average of the past 200 weeks (200WMA) and has proven to be a support zone during bear markets over the years. Should bitcoin fall through the 50MA, there is still the 200WMA.
It is rare for bitcoin to dip below 200WMA, and when it does, it has always proven to be a good buying opportunity. At the moment, the 200WMA is at 19,844 euros, while the current bitcoin rate is 21,500 euros.
The Black Swans of Bitcoin
We zoom out to the past 5 years. Bitcoin has come into contact with the 200WMA three times during that period and only at the beginning of the corona crisis did the price really fall through with conviction. But this will be like a black swan seen and within two weeks bitcoin continued its way up.
Two months ago, the crypto market had to deal with the fall of Terra, another black swan moment that saw the price briefly fall below 200WMA. Now appears to be a good buying opportunity.
Short-term and long-term difference is getting smaller
Another thing to watch out for is the distance between the two colored lines of the first chart, or the difference between the short and long term. If the difference between the two gets bigger, it means the trend is up, but as you can see in the first chart, the difference is getting smaller.
Should bitcoin fall through the orange line and come close to the blue line, at least you now know that this has almost always turned out to be a good support zone.
