Bitcoin has been slowly trending lower this week. The first cryptocurrency by market capitalization appears to have lost momentum as uncertainty spills over into the crypto market from legacy markets.
At the time of writing, Bitcoin is trading at $22,600 with a 4% loss in the last 24 hours and a 1.2% loss in the last seven days.
The cryptocurrency lost its 200-day simple moving average (SMA) at $22,800. In the short term, regaining this level is crucial to maintain the bullish momentum.
The bulls must maintain BTC’s current price levels and push past its 200 SMA to prevent the cryptocurrency from retesting previous support levels. Analyst Caleb Franzen presented the chart below to show how the price of BTC has been rejected at a critical level.
The cryptocurrency managed to reach the top of the channel shown above and now looks set to retest the level below $21,200. This level should act as support in order to stop a downtrend below $20,000.
Data from Material Indicators (MI) shows over $20 million in bid (buy) orders for Bitcoin between $22,200 and $22,400. Whether these orders will be able to fend off the declines remains to be seen, below these levels the order book looks thin up to $19,000.
At the time of writing, there are $16 million in purchase orders at $19,000, which should act as a last line of defense in case Bitcoin continues to decline. Franzen said the following on the potential for BTC to incur further short-term losses:
Whether you want to call this a parabolic trendline or a curved trendline is irrelevant to me. From what I’ve heard from analysts who use them, should we be worried about the short-term momentum reversal for Bitcoin? I do not know (…). Markets can oscillate between the two sentiment/trend extremes. (…) I think the magnitude and speed of this movement have been too great.
Will this time be different for Bitcoin?
A different perspective for Bitcoin price shows that it is currently trading just above its weekly moving average (WMA) of $200-22,300. The cryptocurrency has only lost this level 7 times since its inception, said Yassine Elmandjra, an analyst at Ark Invest.
Once the cryptocurrency recovers this level from a steep loss, it often tends higher. On average, Elmandjra said, Bitcoin sees a 240% increase when this happens.
However, BTC might not follow a similar trajectory immediately, the cryptocurrency could face bearish and sideways price action in the meantime. The analyst said:
On a relative basis, if this bear market is as severe as the 2018 bear market, bitcoin could see more downside. Bitcoin corrected 72% from its all-time high. Bitcoin typically finds global cyclical lows with a correction above 80%.
