Technical Indicator Points to Bitcoin Price Bounce

The impending bearish moving-average crossover on the weekly chart has proven to be a contrary indicator in the past.

Jan 17, 2022 at 12:51 p.m. UTC
Updated Jan 18, 2022 at 4:24 p.m. UTC

Omkar Godbole was a senior reporter on CoinDesk's Markets team.

A lesser-tracked technical analysis indicator is signaling good times ahead for bitcoin.

  • The cryptocurrency's 10-week simple moving average (SMA) is about to dip below the 50-week SMA, confirming a so-called bearish crossover.
  • Historically, the negative signal has proven to be a contrary indicator, marking interim price bottoms and the end of bear markets, as the chart above shows.
  • The previous bearish cross dated mid-March 2020 occurred after bitcoin's coronavirus-induced crash to $4,000. Bitcoin picked up in the subsequent months, setting record highs above $20,000 by December.
  • Similarly, bitcoin bottomed out and rebounded at least 25% following the confirmation of the negative crossovers in early January 2020 and mid-June 2018.
  • Moving averages are based on backward-looking data. Thus, on weekly and monthly charts, bearish and bullish crossovers can be taken to represent oversold or overbought conditions and the potential for price bounce and bull market corrections.
  • That said, technical studies are unreliable as standalone indicators and seasoned traders prefer to read chart-based signals with money flow and fundamentals, which are currently signaling a low probability of a significant price bounce.
  • Bitcoin suffered a deeper drop following the confirmation of the first bear cross between 10- and 50-week MAs seen in September 2014.


The Festival for the Decentralized World
Thursday - Sunday, June 9-12, 2022
Austin, Texas
Save a Seat Now

DISCLOSURE

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

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.

CoinDesk - Unknown

Omkar Godbole was a senior reporter on CoinDesk's Markets team.

CoinDesk - Unknown

Omkar Godbole was a senior reporter on CoinDesk's Markets team.

Trending

1
CoinDesk - Unknown
How the US Can Establish Itself as a Crypto Leader

Regulators have an opportunity to map out thoughtful, strategic policy on stablecoins and beyond.

Regulators have an opportunity to map out thoughtful, strategic policy on stablecoins and beyond.

CoinDesk - Unknown
2
CoinDesk - Unknown
No, the UK Is Not Going to Make USDC and USDT Legal Tender

For “legalize” read “regulate.”

For “legalize” read “regulate.”

CoinDesk - Unknown
3
CoinDesk - Unknown
Thoughts From Davos

The crypto industry showed up in force at the World Economic Forum’s annual meeting.

The crypto industry showed up in force at the World Economic Forum’s annual meeting.

CoinDesk - Unknown
4
CoinDesk - Unknown
Bitso, primer unicornio cripto de América Latina, despide a 80 empleados

El exchange, que tenía más de 700 empleados antes de los recortes, cuenta con cuatro millones de usuarios en la región.

El exchange, que tenía más de 700 empleados antes de los recortes, cuenta con cuatro millones de usuarios en la región.

CoinDesk - Unknown