Many people did not expect it to happen so quickly, but the largest cryptocurrency is already down 9% from last week’s high. At the beginning of last week, green candles flew around her ears. Many people became positive again and dreamed of higher levels. However, the stock market thought otherwise. Bitcoin’s price could not stay above $18,000 for more than two hours before collapsing like pudding.
In today’s analysis, we’ll take a closer look at the reason for this decline and discuss scenarios in terms of future price action. Here we take a key indicator that has served as support throughout Bitcoin’s history, but is currently encountering significant resistance. More on that later!
the rejection
As you can see in the image below, the price showed a rejection of the redline last Wednesday. This price level has had support a few times in recent months. Support turns into resistance, which is exactly what we saw last week.
The price has dropped again and is now hovering in the green line. In my opinion, this is the last support. If bitcoin falls below that, a lower low is almost inevitable. So we are at a decision point where two scenarios are relevant.
Which two scenarios?
In scenario 1, we miss the green line as support (around USD 16,650) and Bitcoin goes much lower. It is always possible that we make a ‘low level’: a low at the same level as the previous low. However, I think it is more likely that we will go much lower as support collapses. This is where a $13,800 price point can come into play.
Scenario 2 is more bullish and the price will make another attempt to break the resistance around $18,000 or higher. If successful, this would be an important milestone and a starting signal for further increases. What is important is that the price breaks through the resistance and successfully tests it as support.
What is the 300 week SMA?
However, one more indicator needs to be considered in this scenario. There is another reason why the price has struggled to stay above USD 18,000. This has to do with an indicator: the 300 weeks SMA. Simply put, this indicator summarizes the last 300 weekly bitcoin prices and takes the average. This creates a line.
Why is this indicator important?
As you can see, Bitcoin bottomed out on this indicator during the “Covid crash” (first black arrow). The price of Bitcoin has never fallen below this line before. However, that changed a month ago. A large red candle has left none of the support this line brings and is now acting as resistance.
Today’s conclusion is that the price is currently facing a decision. It is important for a green Christmas to see an upward movement from here. If that does not happen, there is a good chance that we will reach a deeper low before the end of the year.
Source: Btc Direct
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Roy Brown is a renowned economist and author at The Nation View. He has a deep understanding of the global economy and its intricacies. He writes about a wide range of economic topics, including monetary policy, fiscal policy, international trade, and labor markets.
