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As BTC hits $43.5K. Bearish Bitcoin Fractal Shines With 78% Success Rate

Bitcoin (BTC) fell from $47,358 to $43,178 last week, raising fears of an extended selloff.

Independent Market Analyst Nunya Bizznizo shed light on A bearish fractal related to its 21-week exponential moving average (EMA) on the weekly chart of bitcoin.

In detail, the cryptocurrency has closed below the said support zone 18 times to date, but has maintained its previous bullish bias only four times out of all – as shown by the dotted vertical lines in the chart below.

The BTC/USD daily price chart shows its 21-week EMA. Source: Nunya Business, TradingView.com

In the remaining cases, the bottom of the 21-week EMA caused bitcoin price to drop significantly, except for a simulated bearish breakout in August 2015, which soon resulted in a “tremendous bull run”, as the analyst noted.

Similarly, bitcoin’s recent break below the May 2021 wave also saw it fall below $30,000 for the first time since January 2021. Nevertheless, the crossover did not result in a full bearish breakdown; Traders bought a decline near $30,000 and pushed the price back above $50,000.

But overall, the event that bitcoin price broke below the 21-week EMA caused an extended selloff of around 78% of all time.

Bitcoin again falls below the 21-week EMA

Bitcoin closed the week ended September 26 at $43,178, warning about its 19th all-time fall below the 21-week EMA – which stood at around $43,502 at weekly close.

While fractals envisioned a negative outcome, a closer look at the relationship between the 21-week EMA and the 50-week simple moving average (SMA) – as shown in the chart below – noted that A possible bearish outlook will require further validation.

This is mainly due to traders’ immediate reaction to the two moving averages, especially when the 20-week EMA (green wave) closes below the 50-week SMA (blue wave). The so-called death cross indicator previously coincided with a further decline in the bitcoin market.

Bitcoin price weekly chart is characterized by a 20-50-MA death cross. Source: TradingView.com

For example, the BTC/USD exchange rate slipped below its 21-week EMA (~$8,041) in the week ended January 29, 2018, but continued to lose its momentum until the green wave closed below the blue one. Upward bias maintained. Later, the pair went down from the bottom near its 200-week SMA (about $3,187).

Similarly, the 20-50 MA death cross in March 2020 came just a week before the infamous Covid-19 selloff, which led to a global market crash due to COVID-19. Again, bitcoin closed near its 200-week SMA (~$5,512), only to bounce back towards new all-time highs in subsequent sessions.

RELATED: JP Morgan CEO Says Bitcoin Price Could Rise 10x But Still Won’t Buy It

Therefore, it appears that a potential death cross between the 20-week EMA and the 50-week SMA could trigger the next selloff crisis, with the ultimate downside targeting near the 200-week SMA (approximately $16,000). .

At the same time, the Fibonacci retracement levels near $34,712 and $27,580 are likely to stop bitcoin price from moving towards the 200-week SMA.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, so you should do your own research when making a decision.

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