Following the best week of returns for the bitcoin (BTC) price since October, the cryptocurrency market mood seems to have turned around. They were already three consecutive months closing in the red, so the positive start of February may sound encouraging.
So far in the second month of the year, the price of BTC has risen more than $5,000. Recovery of about 14% seems to indicate a change in trend and a good near future for the cryptocurrency. But has there really been a trend reversal and have we seen the end of the bear market?
A brief comparative study with this moment of the market and the bearish trend of the beginning of 2021 sheds some light on what could happen. At least that is how it is considered in the latest newsletter from Bitcoin Fear and Greed Index.
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The report concludes, after assessing how the price of the leading cryptocurrency performed at the time: “If history is any indication, then bitcoin appears to be emulating the final phase of a prolonged downtrend.”
What is that history that could repeat itself?
The newsletter compares these two market moments through a “trend extrapolation”. In short, look for the common points between the two using the intracycle trend indicator. Or what is the same: the analysis of the moving averages of 20, 50 and 100 days.
“As long as the 20-moving average exceeds the 100-moving average, it indicates a bullish reversal at a time when the short-term fluctuations in price significantly exceed the long-term average. When the 20 MA crosses below the 100 MA, the opposite happens.”
Fear and Greed Index Newsletter.
Of the two scenarios described above, the first currently seems to be approaching. And in a very similar way to the one it did last year just before breaking upwards the resistances of the moment and marking new all-time highs. in the following months: first, a false breakout; then a failed breakout attempt followed by “a major price capitulation, forming a lower low within the local range of each trend.”
They also share these market moments the time it took for bitcoin to retry the bullish breakout after the capitulation. In both cases, about two weeks, highlights the analysis. The third similarity is that, in just five days in both cases, BTC went from breaking the 20 day moving average (short term) to starting to challenge the 50 day moving average (medium term) without experiencing any price retracement along the way.
Today and tomorrow of bitcoin
The report states that bitcoin is currently testing the 50-day moving average, located around $43,000. As of this writing, in fact, it ranks higher, hovering around $44,000 worth of trade on exchanges. This, it should be noted, has occurred just after the breakout of the 20-day. That is what the previous assessment about the rapid rupture of both brands refers to.
Reading this analysis adds that in the event that the cryptocurrency manages to convert the moving average that it is currently challenging into a new support (that is, into a price floor on which to hold on in this cycle), the next rally could be towards $47,000 per BTC.
But there is a caveat that the report reveals: nothing is guaranteed in the markets and technical analysis is not a guarantee either. If it were for that alone, the text says, “it would be easy for us to assume that bitcoin is on the brink of a definitive trend reversal.”
However, while there is a “fascinating” similarity between the two downtrends studied, it does not have to be the same as before. After all, “if history were to repeat itself or rhyme, then this would be the most likely scheme.” But the market is governed by too many variables: among them, unpredictable macroeconomic events, regulatory advances or unexpected crises that, sentenced in this bulletin, “could negate this scenario.”