Bitcoin has hit today the 1W MA50 (blue line on the chart) for the first time since May 2020 (May 25, 2020 weekly candle to be exact). That was more than 1 year ago and it was a time when after a 2 month consolidation, the price detached from the 1W MA50 and never looked back starting the impressive rally that peaked in April 2021. But what does hitting the 1W MA50 mean for BTC? Is it a good or a bad sign, mid/ long-term? Let's dive into its historic price action.
** The pattern since 2014 ** As you see on the main chart, since 2014, the 1W MA50 has been hit as a Support after a notable peak (or All Time High/ ATH) three times. Out of those three, it was twice at the start of a Bear Cycle (April 2014 and March 2018) and once after a Bull Cycle (November 2019) has already started (the current one).
In more detail: - The April 07, 2014 1W candle that hit the 1W MA50, rebounded and made a High within the 0.5 - 0.618 Fibonacci retracement level just 7 weeks later. - The March 26, 2018 1W candle that hit the 1W MA50, rebounded and made a High on the 0.382 Fibonacci retracement level just 4 weeks later (although that 1W MA50 contact was a Higher Low after the February 05, 2018 candle that bottomed initially lower. If we assume that was the low (though it came just shy of the 1W MA50) then the rebound broke the 0.5 Fibonacci level and even came too close to the 0.618). - The November 18, 2019 1W candle that hit the 1W MA50, rebounded and made a High on the 0.618 Fibonacci retracement level just 12 weeks later. If it wasn't for the 'once in 100 years event' of the March 2020 COVID flash crash, it is possible that the new low would have never been made. That is why I classify it as an Abnormal Event and instead of a Bear Cycle, a continuation of the start of the Bull Cycle.
** The pattern before 2014 ** I have separated this phase from the post 2014 era, as Bitcoin was still in its early stages and still in uncharted waters. On its first Bear Cycle of its short history, BTCUSD hit the 1W MA50 (which as you see on the chart below only counted 10 weeks of registered candle action) on September 05, 2011. It never rebounded and instead went straight for the Bear Cycle's bottom in only 6 weeks later. Can we derive firm conclusions from the Cycle alone? I don't think so but definitely we shouldn't discount it from our analysis.
** The RSI on the post 2014 1W MA50 hits ** It is interesting to note however, that on all post 2014 1W MA50 hits, the RSI was within the 44.000 - 40.000 range.
So what do the above stats tell us for the current price action? Those indicate that now that the 1W MA50 has been hit, there are higher probabilities for a rebound towards the 0.382 - 0.618 Fibonacci retracement range. That happened 3 in a total of 4 times since BTC's genesis. Assuming today was that bottom, the 0.382 Fib is around $39000, the 0.5 Fib around $43000 and the 0.618 Fib around $47400 (all rough estimates). Do you think BTC will rebound as per the historic patterns and if it does which Fib will it hit? Or will it follow the 2011 Cycle and go straight for a Bottom?
Feel free to share your work and let me know in the comments section!
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@fract, so to me. if this were a tangible asset, most will be wrong.. issue i see with a rebound is no one will buy it.. chart looks destined for 20K.. so two things will happen.. we will never get close to 20K and everyone fomos in to 100K.. or everyone buys in a t the bottom at 20K and we goto 10K.. with all these lined up buyers at 20K my bet is everyone will be wrong.. or by the time we get to 20k no one is intersted thus we go down to 10k.. i use a bit of history and if you take the low from every bull market you can times it by 2.47 or so.. so the low of 6500 x 2.47 .. i say the bottom will be near 16K..
and to add one thing i think everyone forgets is on the downside the leverage will get sucked out. and the defi market.. can it handle these price swings.. if you hear of a aave or another not being able to repay BTC .. this could be a black swan.. if you want to buy btc i feel like the worst that could happen is you buy a little higher.. and as always i think time heals all.. and we havent had enough.. i will get bullish when btc trades sidewasy for 2*4 months..
cosmicnexus
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Looks to me to indicate a high probability of perhaps as much as 40-50% more downside for BTC from here based in what that chart shows happens after hitting the MA50 before the trend turns bullish again.
Joseph_King
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Thank you for your great work, as always.
There is divergence on 1D chart, normally this type (as opposed to hidden divergence) points towards a trend reversal.
paul2k99
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Great work ! Agreed mostly per EWT we finish the drop today now clear to go up the first stop should be around 39