Despite the traditional view of the stock market in 200-day moving averages, a dip below could mean a sell event for Bitcoin.
Bitcoin has been trading sideways through most of December, struggling to stay above the 200-day moving average (MM).
After a strong October and an early November of new highs, Bitcoin encountered a roadblock in December, having lost 13.60% since the beginning of the month. This reality contrasts sharply with the widespread belief that the price of Bitcoin would hit $100,000 by the end of the year.
As of this writing, Bitcoin is trading around $47,204, after having closed below its 200-day moving average on Tuesday. According to Bitcoin Magazine, the 200-day MM is often used to assess the long-term trend of an asset in traditional capital markets. An asset is generally considered to be in an overall uptrend as long as it remains above its 200-day MM.
In March 2020, Bitcoin broke violently below its 200-day MM as the pandemic outbreak spread fear throughout the world, including the capital markets. Bitcoin took about two months to return above the moving average, triggering a stellar bull market that would extend beyond the end of the year. Bitcoin stayed above its 200-day MM for over a year until China banned Bitcoin mining, once again spreading fear to those unaware of Bitcoin’s actual working mechanics and triggering a short winter of price during the summer months.
Despite the traditional stock market view that an asset below its 200-day MM could be bearish, for Bitcoin this could represent a sell event. Given the strong and unique fundamentals of the peer-to-peer (P2P) currency and its track record of crushing all other assets over the past 10 years, a dip below a technical indicator can serve as an indication of discounting, especially given the volatility of Bitcoin , which makes it dip and rise faster than traditional assets.
