There are warning signs on the weekly chart that Bitcoin could potentially be set up for another significant bearish move.
Many analysts are monitoring the 200 simple moving average (SMA) which is often used to identify the direction of the long-term trend.
Murad Mahmudov, a cryptocurrency analyst, highlighted his reasons why he believes the 200-week moving will be broken in a series of tweets.
1/ Why I believe the famous 200-Week Moving Average support from the last bear cycle WILL BREAK during this bear market cycle:
— Murad Mahmudov 🚀 (@MustStopMurad) January 31, 2019
Bitcoin met support at the 200 MA when it formed its 2018 low at $3122.
However, the price has already broken below the 200 exponential moving average (EMA) which many analysts also consider an extremely bearish sign for price prospects.
The price rally we saw in mid-December met resistance at the 200 EMA with price forming a lower high.
The consolidation we are currently seeing increases the likelihood that the next significant drop will be to the downside.
If price breaks below 2018 low and the $3000 point, we may not see more significant support until the $900 to $1100 region as this was the last area where price consolidated for a significant period.
There was a brief spell of consolidation around $2500 during June of last year so it is possible that some support may come into play here, but the strength would be questionable especially in the case that price builds sufficient momentum to break below the 200 SMA and $3000.
The lower timeframe daily chart shows that this weeks price action started with bearish movements.
The rest of the week was mostly spent with price in a range between $3353 and $3476.
It has already tested both ends of the range a number of times.
- Price currently trades between the weekly 200 EMA and the weekly 200 SMA.
- The weekly 200 SMA is providing support but sufficient seller momentum to break below this point and the $3000 point may result in a significantly bearish move for price action.
- Price has traded between $3353 and $3476 for most of the week and has already tested both of these levels.