Bitcoin has taken a negative turn overnight, dropping to just below $9,000, suggesting that a return to the deeper $8,000s is likely. Following months of strength Bitcoin is now unsurprisingly showing signs of fatigue, and there are a number of key reasons why going lower is more likely, with Ethereum also feeling the pain.
Bitcoin Looking Ready to Hit the 20-Week Moving Average
As we can see from the weekly chart below, there is a clear pattern with the 20-week moving average (blue line) that has played out for throughout Bitcoin’s history:
On almost every single occasion when Bitcoin has experienced a volatile move it has eventually returned to the 20-week moving average afterwards. The 20MA has acted like a magnet almost perpetually during Bitcoin’s history, and unless Bitcoin is headed for one of its famous $1,000 candles or it is about to break with history, we are destined to make contact again with the 20MA, which sits at $8,300 at present.
Secondly, let’s not forget that Bitcoin has enjoyed 12 weeks of almost continuous upside following its drop to $3,850 in March. No asset can sustain such a run without retracing a little, so a 17% haircut off the $10,000 top would be nothing to be worried about. Given that this 12-week run has seen Bitcoin go up 160%, losing even 40-50% would not be unexpected.
Ethereum Drop Suggests the End of Alt Season…For Now
The drop has not been good news for alts, most of which have dropped more than Bitcoin, while Ethereum has dropped against its Bitcoin pairing, reacting negatively to its key level of ₿0.025:
This is not only bad news for Ethereum but bad news for alts in general, and we could now see Bitcoin regain some of the market share as people de-risk from alts.
No Trade Show
The market is now a no-trade scenario as we look to our established support levels of $8,400-$8,600 and $7,600-$7,750 to hold, as well as to the 20MA to see if it acts like a magnet again. If Bitcoin hits these levels and reacts positively then we can assume that the next market cycle is still on, with only a daily close under $7,600 causing us concern for the immediate future.