BTC price upside depends on whether two long-lost moving averages can be flipped to support, Bitcoin analysis predicts.
Bitcoin faces a sink-or-swim resistance test to confirm its “macro breakout,” new analysis says.
In a tweet on Feb. 2, on-chain monitoring resource Material Indicators flagged key levels to flip to support after BTC/USD spiked above $24,000.
Incredibull day.#Bitcoin pic.twitter.com/3Tg6hlados
— Material Indicators (@MI_Algos) February 2, 2023
Bitcoin price gears up for trend line showdown
In what was ultimately a boon for Bitcoin bulls, the United States Federal Reserve delivered what risk-on traders wanted to hear on Feb. 1.
With Chair Jerome Powell using the word “disinflation,” hopes immediately began to bet on rate hikes ending sooner and easier monetary conditions returning in their place.
The mood was palpable across crypto, with BTC price action reversing an initial drop to see new six-month highs of $24,250 on Bitstamp.
While a subsequent correction took the largest cryptocurrency around $500 lower, the mood has since stayed buoyant.
For the good times to continue, however, Material Indicators believes that BTC/USD must now tackle two trend lines, which have formed resistance for much of 2022.
These are the 50-week and 200-week moving averages (WMAs), and so far, bulls have failed to even retest them, let alone flip them to support.
The 50WMA and 200WMA currently stand at $25,345 and $24,837, respectively, data from Cointelegraph Markets Pro and TradingView confirms.
“Must test key Moving Averages to confirm macro breakout or fakeout,” part of commentary stated.
An accompanying chart showed the state of the Binance order book at the time, with resistance shifting higher to allow spot price to rise with it. As Cointelegraph reported, this is a phenomenon which had already been playing out prior to the Fed event
Continuing, Material Indicators described the subsequent BTC price run-up as a “Herd of Bulls Stampede Through the Gate” in the absence of resistance pressure.
“Whether it leads to the slaughterhouse or the auction house TBD at the 50WMA and 200WMA,” it added.
“Toppy signs” and “wild cards”
Currently, BTC/USD has spent longer than ever below the 200WMA, a key aspect of its 2022 bear market which singled it out from others in its history.
Furthermore, the two WMAs in focus are in the process of forming what is known as a “death cross,” where the falling 50WMA crosses under the 200WMA.
Should this play out, analysts fear that it may engender fresh downside, as was previously the case with events on lower timeframes,
“No doubt risk assets have been correlated, but BTC out performed TradFi in January with a 40% rally,” Material Indicators co-founder, Keith Alan, commented prior to the Fed.
“Now, SPX has a triple top on the Monthly and BTC is headed for a Death Cross on the Weekly. These are toppy signs, but the FED, FANG and labor market are dealing wild cards.”