In its last weekly close before the holidays, Bitcoin (BTC) once again broke below the fragile $17,000 support level, surrounded by negative rumors that continue to haunt the cryptocurrency market.
Although it withstood the stress tests of massive withdrawals from clients and market makers last week, the Binance exchange remains in the spotlight in the cryptocurrency community.
The strategic exit of Mazars, the audit firm that has verified and certified Proof of Reserves (PoR) for the world’s largest exchange by trading volume, and the abandonment of not only Binance but all of its clients in the cryptocurrency industry, has kept traders on edge, at the same time that In which the media and regulators attack the multinational corporation led by Zhao Changpeng “CZ”.
This decline was taken by many in the crypto community as a sign that something might be rotten in the world of Czechoslovakia. Although data analysis companies on the chain Nansen and CryptoQuant confirmed Mazars’ findings, the evidence not helping to reassure investors unsettled by the crushing series of crashes and bankruptcies that began in May this year with Collide Decentralized Finance (DeFi) Terra (LUNA) in native currencies.
The massive liquidation of the assets of the Genesis Trading portfolio was also interpreted as a sign that the giant is looking for liquidity to meet its obligations after failed attempts to raise funds in the market.
The collapse of one or the other, or even both, can act as a catalyst for the expected eventual capitulation of the market. What’s more, from a macroeconomic point of view, there are not enough factors that can offset the inherent weakness in the cryptocurrency industry, which leads to relief rally and even a sustainable trend reversal in the medium and long term. This is something that will likely happen only in the next year.
If there is no reason for optimism in the fundamentals field, the fearful and unprecedented approaching “death cross” on the BTC/USD weekly chart signals fresh short-term lows and suggests that the BTC price bottom, currently at $15,500, could be retested.
Last week, on December 13, shortly after the release of US inflation data for November, Bitcoin retested the $18,000 region for the first time in over a month. It was rejected on its first attempt, but reached $18,387 the next day. However, it did not have enough strength to turn the resistance into support and since then it has corrected close to 10%.
In an exclusive analysis for Cointelegraph Brasil, Crypto Investidor founder Diego Consimo states that a “death cross” does not necessarily configure as a negative event for the BTC price:
The so-called death cross in technical analysis is the crossing of the 50-day moving average (MA50) below the 200-day moving average (MA200), which usually forces the price to make violent corrections. These crossovers are powerful when they occur on the weekly and daily timeframes. But what few people know is that this type of crossover usually occurs after the downward price movement has already occurred. Therefore, most of the time, when the averages end up crossing over, the price has already found its bottom and begins the process of consolidation towards a reversal.”
Consimo notes that in 2015, the BTC/USD weekly chart showed a very similar setup to the one we are seeing now, which turned out to be positive for the long-term BTC price action:
In the case of Bitcoin, the death cross has never occurred on the weekly chart throughout its history, in 2015 the MA50 on the weekly approached the intersection with the MA200 on the weekly chart, but the move was avoided by the market, which raised BTC and started a bullish process that took Bitcoin from $200.00 range to an all-time high in 2017, when it reached the $19,700 mark, up 9,800%.”
However, given the current market conditions, Consimo claims that a “death cross” could be confirmed and BTC price might seek a new low below the current $15,500:
“In the current cycle, the MA50 is approaching the MA200 on a weekly basis and is pushing the price lower. Now, it remains to be seen if this crossover will actually happen, prompting BTC to test its support in the $14,500-12,000 area, or whether we will have A move similar to that of 2015, while avoiding crossovers to mark the start of a new bullish cycle.”
In the chart below, Consimo shows the relationship between the 50-day and 200-day moving averages on the weekly chart of Bitcoin since 2014.
BTC/USD weekly chart with MA50 (green) and MA 200 (red) highlighted. Source: Crypto Investor
The analyst also points out that from a historical perspective it is based on 4-year cycles organized around halfAs shown in the chart below, it is possible that Bitcoin has already consolidated the price bottom of the current cycle and is already in the accumulation phase:
“Bitcoin is already in a historic state of having bottomed out before the halving. The last two cycles, from 2020 and 2016, may have created the halving bottoming pattern event about 500 days before the event. In 2016, the bottoming was set 518 days before the halving occurred. The event and in 2020 the bottom was marked 532 days before the event. Bitcoin is now 550 days away from the next halving, which should happen in May 2024.”
The price of the BTC/USD pair is down against the halving. Source: Crypto Investor
Felipe Villa, a securities and cryptocurrency analyst at Ativa Investimentos, shares the view that the bottom of the current bearish cycle for Bitcoin has already consolidated, as he explained in an interview with Cointelegraph Brasil last week.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should do their own research when making a decision.