Bitcoin has finally started to show some signs of weakness after stagnating above $7,500 for days on end, recently dipping under the key support in and around $7,400. As of the time of writing this, the cryptocurrency is trading for $7,350 on many major exchanges, posting a 2% loss in the past 24 hours.
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While a 2% loss doesn’t seem decisively bearish, a leading analyst has said that a loss of the $7,400 price level, which currently doubles as the 100-period simple moving average for the four-hour chart, could imply that a strong drop in the Bitcoin price is coming. Here’s why.
Bitcoin Needs to Hold $7,400?
Nunya Bizniz, a popular cryptocurrency trader, recently noted that the 100-period simple moving average for Bitcoin has been a level of utmost importance over the past few months. He wrote that “For the past handful of months, a close above or below the 100ma has been indicative of continuation.”
For the past handful of months, a close above or below the 100ma has been indicative of continuation.
Price is currently below the 100ma, however 3 hours remain until close of current candle.
Kind of important area. pic.twitter.com/1prDOPVYpj
— Nunya Bizniz (@Pladizow) December 9, 2019
Indeed, as Bizniz illustrated in the chart above, a price cross below the level always preceded massive price drops of anywhere from 10% to 20%, save for one occasion where only a 3% drop ensued.
Right now, BTC looks poised to break below that moving average, with bulls failing to keep up with bears. Should historical price action be of any current relevance, a close under $7,400 in around 30 minutes’ time (from the time of this article’s publishing) will show that the leading cryptocurrency could plunge by 10%, or maybe even more.
$7,400 is also important because it was the place where Bitcoin bottomed late in October, prior to the 40% jump to $10,500. As the below analyst pointed out in the tweet seen below, his bullish bias will break if BTC manages to close under $7,400.
At a critical level. Break below (above on inverse chart) 7400 and my bias reverses. Price hasn’t broken down so still cautiously optimistic about an upward move pic.twitter.com/pFga46VAUh
— Mr Chief (@HaloCrypto) December 9, 2019
While the short-term outlook for Bitcoin may be about to flip bearish again, some say that the medium to long-term directionality for the cryptocurrency remains in bullish territory.
Adaptive Capital partner Willy Woo recently noted that on-chain momentum, which the popular analyst has long claimed is correlated with Bitcoin’s macro price trends, is “crossing into bullish” territory after a multi-month downturn.
With this in mind, he asserted that the “bottom is most likely in,” meaning that any move lower than the $6,500 plunge “will be just a wick in the macro view.” He added that the unnamed indicator also implies that cryptocurrency investors will start to front-run the impending “halving,” the block reward reduction that will be taking place in May 2020.
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