View BTC is on the defensive and may face selling pressure in the run up to the bearish crossover of the 100- and 200-day averages. Prices will likely breach the 50-day average support near $8,550 and extend losses toward $8,000 in the short term. Confirmation of the bear cross may mark an interim bottom in BTC, according to historical data. A high-volume move above a three-month descending trendline, currently at $9,200, is needed to revive the bullish view.
Bitcoin risks falling below key support near $8,550, with a widely followed bitcoin price indicator teasing its first bearish turn in over a year.
The top cryptocurrency by market value is currently trading at $8,610 on Bitstamp, having bounced up from the 50-day moving average (MA) support at $8,543 earlier today.
The 50-day MA has been restricting downside since Nov. 8, but may be breached soon, courtesy of a looming bearish crossover between major price averages.
Bitcoin’s 100-day MA (now at $9,436) is now beginning to trend south and looks set to cross below the 200-day MA (at $9,290) in the next couple of days. That would confirm a bearish crossover – the first of these MAs since April 17, 2018.
Seasoned traders would argue that MA crossovers are based on past data and are lagging indicators. While that’s true, BTC is already on the defensive, having repeatedly failed to break above a 3.5-month bearish trendline in the last three weeks.
The cryptocurrency has also found acceptance below the 200-day MA – a barometer of long-term trend. As such, the impending bear cross will likely bolster the bearish sentiment and give prices another nudge down. Daily chart
The cryptocurrency has pulled back from $9,300 to $8,600 in the last few days, validating the bearish view put forward by the multiple rejections at the trendline connecting June and August highs.
The relative strength index is hovering below 50, indicating a bearish bias, while the MACD histogram is producing deeper bars below the zero line – also a sign of strengthening downside momentum.
So, the 50-day MA support at $8,543 could be breached ahead of the bear cross. Below that level, the next major support is seen at $8,000.
The bearish case would weaken if there is a strong bounce from the 50-day MA, but that seems a tall order right now. A high-volume UTC close above the descending trendline hurdle at $9,200 is needed for bullish reversal.
Note that confirmation of the bear cross, however, could mark an interim bottom in BTC, as has been seen historically.
BTC sell-off ran out of steam near $275 two days ahead of a bear cross confirmation on Oct. 7, 2014, following which prices jumped to levels above $400 by mid-October, according to Bitstamp data. Another bear cross on April 29 the same year was followed by consolidation in the range of $420-$450 and a rally to $680 by early June.
And in 2018, prices rallied from $7,900 to levels near $10,000 in the 2.5 weeks following the bear cross in mid-April.
Back then, BTC was better bid in the days leading up to the crossover with prices rising from $6,500 to $8,500. In such situations, looming bearish crossovers barely receive any market attention.
Disclosure: The author holds no cryptocurrency assets at the time of writing.
Bitcoin image via Shutterstock; charts by Trading View