Bitcoin (BTC), the most well-known cryptocurrency (learn more about Bitcoin), is showing a risky chart pattern similar to the one seen at the end of 2021. According to an analysis from a market expert called Material Indicators, this could lead to major changes in Bitcoin’s price. If this pattern continues, Bitcoin’s price might drop significantly, just like it did during the 2022 crypto winter (learn about Crypto Winter).
The Pattern Worrying Investors
Material Indicators mentioned that Bitcoin’s current weekly chart looks very much like what it showed before the big 2022 market crash. “Bitcoin’s price movement now reminds us of a similar period in the past cycle. We’re reaching the critical point where the trend was decided back then,” they explained.
One important aspect is Bitcoin’s current price trading between the 100-week and 50-week Simple Moving Averages, or SMAs (understand SMA here). These SMAs are commonly used by analysts to track the overall direction of prices. Last time, this movement signaled a major drop. However, there is one key difference this time around: Bitcoin has already lost the 50-week SMA support, and another market measure called the Relative Strength Index (RSI) (learn about RSI) has dropped below the critical level of 41. This means the momentum, or the pace at which Bitcoin prices move up or down, is weaker now than it was in 2021.
What Does This Mean for Bitcoin?
Material Indicators warned of a “death cross” (what is a Death Cross?) forming on the weekly chart. This happens when a short-term SMA crosses below a long-term SMA, often signaling a long-term downtrend in prices. In about two weeks, if the 21-week SMA crosses below the 50-week SMA, it could confirm that Bitcoin is entering a bearish phase (a period of falling prices).
The key test now is whether Bitcoin can bounce back and regain the 50-week SMA as its support level, which means the price needs to stay consistently above this line. If it doesn’t, the chances of Bitcoin’s price falling even further grow much higher.
Right now, there’s also a lot of investor activity around the $100,000 level. Many traders are holding on to Bitcoin at this price point, which might prevent the price from going much higher. Material Indicators summed it up by saying, “The next two to three weeks are going to be crucial. Either Bitcoin stages a strong recovery, or the trend could turn much more negative.”
Bitcoin and the Crypto Market
On December 30, Bitcoin was priced at about $87,400. This marked a drop of nearly 3% in the last 24 hours and around 30% from its record high above $126,000 in October. Earlier, Bitcoin briefly rose above $90,000, but experts doubted if this increase could last long. One analyst, Ali Martinez, called it a possible “dead-cat bounce,” which is a temporary recovery of prices before they continue to fall.
Martinez pointed out that more money is leaving the cryptocurrency market than entering it. For example, in the past months, investors have pulled out more than $4.5 billion from Bitcoin-related funds. Particularly, Bitcoin ETFs (Exchange-Traded Funds designed for Bitcoin investments) have been experiencing months of outflows, losing billions in value.
Other Cryptos Are Doing Better
While Bitcoin may be struggling, other cryptocurrencies are doing better. Funds related to XRP (learn more about XRP), another popular cryptocurrency, attracted $1.14 billion in new investments. Solana (more on Solana), a blockchain platform known for its speed, pulled in $1.34 billion in new funds. So even though Bitcoin is facing difficulties right now, some parts of the cryptocurrency market are still thriving.
The next few weeks are important for Bitcoin. Investors and traders will watch closely to see if it can recover or if it’s heading for a deeper price drop, just like what happened in the past.