- Bitcoin has spent the vast majority of the last five months underneath the 200-week Moving Average
- Traditionally, touching this level has started the next market cycle
- Bitcoin crashing through it puts it in uncharted waters and spells a long crypto winter
Bitcoin’s price is, understandably, performing very badly since the FTX affair hit last week, but this merely accelerated what was already happening. However, something important has taken place with the long term price action that has never happened before and shows that Bitcoin might be entering the winter to end all winters.
200-week Moving Average is Key
In order to make such bold claims we need to look at a key metric – the 200-week Moving Average (MA). This shows the performance of an asset over a long term period and gives a clear idea of both when an asset might be good value compared to its previous performance and how buyers are reacting at these levels.
Here’s Bitcoin’s 200-week MA from Look Into Bitcoin:
As we can see, Bitcoin has touched this 200-week MA on several occasions in the past, all of them during bear markets or during capitulations. On all occasions, price moved or bounced off this line into a period of major price acceleration. This made the 200-week MA a glorious buying opportunity.
Bitcoin Trading Well Below Key Level
Now compare that with June 2022. The 200-week MA has, for over a decade, acted as support, being the point where price traditionally bottoms out, giving buyers a signal to get into the market. However, since dropping through it in June, the 200-week MA has started acting as resistance, with price not just unable to break through it but in fact detaching itself further from it – the most recent drop last week sent it $8,000 below this crucial level of support turned resistance.
This is uncharted territory for Bitcoin, but what does it mean? In simple terms it means that buyers can now no longer rely on the 200-week MA as an indicator of Bitcoin sentiment. Because of all the scandals and collapses this year, from Terra back in May to FTX last week, sentiment in crypto is at rock bottom, which is why buyers have simply not turned up. Many suspect there will be further downside to come, and price is now so far down from what has traditionally been a barometer of bottoming sentiment that there is now no guide as to when the bottom will be in.
Here be Dragons
Bitcoin has never spent more than a few days below the 200-week MA, and now it has spent five months there. The fact that no one is buying despite this being historically the most prime buying opportunity of all time tells you all you need to know about where sentiment in the market is right now.
Even if Bitcoin were to suddenly fly back up to this level, there is every chance it would be rejected and drop back down again, if sufficient time hasn’t passed for the market to lick its wounds.
Until Bitcoin crosses back above this 200-week MA and treats it as support, there is no guarantee that the market has turned. And this doesn’t look like it will happen anytime soon.