Despite rising above its 50-day moving average again today, the bitcoin-US dollar (BTC/USD) exchange rate is having a hard time gaining altitude.
At press time, the cryptocurrency is trading at $4,188, down from a high of $4,269 earlier today; its highest level since September 12. Week-on-week, BTC is up 14.4%, while month-on-month it is still nursing 5.5% loss.
Still, with no clear news or technical drivers, there is cause for concern that a potential "bull trap" is developing. With prices failing to build on the overnight bullish break, caution is likely to seep into the market.
Further, price action analysis underscores the need for traders to be cautious – a failure to hold above 50-day moving average for the third time could turn the tables in favor of the bears.
Daily chart - History is not repeating itself
On the charts, bulls are struggling to mimic a successful pattern in July (when a rebound from the 100-day moving average in the wake of an oversold relative strength index was followed by a rally to record high).
Back in July, the rebound from 100-day moving average was followed by a convincing break above the 50-day moving average.
This time, however, it's a different story. Rather, bulls are having a tough time keeping the cryptocurrency above the 50-day moving average. BTC has already failed twice (on September 16 and September 19) to build upon a break above the indicator.
Prices rose above 50-day moving average yesterday, but faced rejection at $4,269 and fell back to $4,140 (the 50-day moving average). A failure to hold above the key moving average for the third time would be bad news for bitcoin.
A failure to hold above 50-day moving average followed by a break below the rising trend line support (seen sloping higher to $3,930) would signal the cryptocurrency has topped out. Prices could then drop to $3,382 (100-day moving average levels).
Sideways to positive action above the 50-day moving average over the next 48 hours or so would improve the odds of a rally to $4,500-$4,665 (September 7 high).
Bug zapper via Shutterstock
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.
Learn more about Consensus 2023, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.