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Bitcoin's Move Below 20-DMA Possible Short-Term Bearish Signal, Analysts Say
The world’s largest cryptocurrency by market value traded at a 10-day low and slipped below the 20-day moving average.
Updated Apr 21, 2023, 6:01 p.m. Published Apr 20, 2023, 4:43 p.m.
Bitcoin lost ground for a second straight day on Thursday, dropping to a 10-day low of $28,300 as traders appeared to move away from risky assets.
After rallying since the start of the year, the world’s largest cryptocurrency by market value, bitcoin, appears to be losing ground. Bitcoin closed below the 20-day moving average (DMA) on Wednesday, according to data from TradingView, signaling a sign of weakness. The last time the cryptocurrency traded below the 20-DMA was in mid-March.
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A 20-day moving average is a short-term view and could allow investors to trigger further selling pressure, according to Laurent Kssis, a crypto trading adviser at CEC Capital.
“The 20-day moving average has less lag [time it takes to signal a potential reversal] and tracks more closely bitcoin,” said Kssis. “In our view it shows a correction to the market which could accentuate.”
The drop comes a day after a large bitcoin sell order on crypto exchange Binance and an unexpectedly high U.K. March inflation figure of more than 10%.
“This pullback doesn’t look positive. However, when looking at bitcoin’s yearly chart, it's clear we have just witnessed a period of exceptional growth as the industry recovers from the crypto mishaps of the past few years,” said Sheraz Ahmed, managing partner at Storm Partners, in an interview with CoinDesk.
“We could be witnessing the beginnings of an overdue but overall healthy correction, which should encourage further accumulation,” added Ahmed.
In traditional markets, sentiment was knocked by a decline in Tesla (TSLA) shares, which dropped 8.5% on the day, following the company’s earnings report released Wednesday. It showed a more than 20% drop in net income compared with last year. The Dow Jones Industrial Average and S&P 500 are currently down while the Nasdaq is flat.
Craig Erlam, an analyst at foreign-exchange trading firm Oanda, said in a Thursday note that despite bitcoin’s rally since the start of the year, the recovery may be running on fumes.
Read more: A Technical Analyst’s Take on Crypto
UPDATE (April 20, 2023 16:00 UTC): Updates the stock exchanges' movement.
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Coinbase Sees Crypto Recovery Ahead as Liquidity Improves and Fed Rate Cut Odds Climb
The crypto exchange also took note of a so-called AI bubble that continues to go strong and a weaker U.S. dollar.
What to know:
- Coinbase Institutional is seeing a potential December recovery in crypto, citing improving liquidity and a shift in macroeconomic conditions that could favor risk assets like bitcoin.
- The firm's optimism is driven by rising odds of Federal Reserve rate cuts, with markets pricing in a 93% chance easing next week, and improving liquidity conditions.
- Several recent institutional developments, including Vanguard's crypto ETF policy reversal and Bank of America's greenlighting of crypto allocations, have contributed to bitcoin's rebound from recent lows.
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