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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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Bitcoin’s Deep Correction Sets Stage for December Rebound, Says K33 Research
K33 Research says market fear is outweighing fundamentals as bitcoin nears key levels. December could offer an entry point for bold investors.
What to know:
- K33 Research says bitcoin’s steep correction shows signs of bottoming, with December potentially marking a turning point.
- The firm has argued that the market is overreacting to long-term risks while ignoring near-term signals of strength, like low leverage and solid support levels.
- With likely policy shifts ahead and cautious positioning in futures, K33 sees more upside potential than risk of another major collapse.
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