At the time of writing, Bitcoin BTC/USD has slumped 20% since the start of the weekend into this new trading week, taking the total decline in price to 67% since November 2021.
Crucially, the price has broken through a significant support zone that has been propping the price up for the last five weeks, as highlighted in my previous update on June 9th.
Does this mean the end of Bitcoin as we know it and further declines to levels not seen since 2017? I wouldn't be so sure just yet.
The challenge to declines is knowing which level will hold firm and force the price back up. The only way we know is when the price dictates a reversal by confirming a bounce.
As investors/traders, our job is to conduct our analysis objectively, identify potential reversal points and wait for the price to validate our analysis.
Now that the price has broken the low of May 2022, where could BTC find support next and force a reversal back to the upside?
Well, Bitcoin is now at a support level with a real chance of ending the bear dominance and giving the momentum back to the bulls in the form of the 200-week simple moving average (SMA).
Throughout its history, each time price has declined to the 200-week SMA, the price has bounced off it, and a bull run has materialized.
This happened in 2015, 2018 and last in 2020. Will we see the same again in 2022 and potentially even see the price reach $100,000 this year?
Below is the monthly time frame.
As investors, we are in the game of probabilities, not certainties.
Technical Analysis is uber useful in that patterns repeat, and what has happened in the past is very likely to repeat in the future. Bitcoin has every chance of bouncing at this level, but also has every chance of breaking through.
When the price of an asset pulls back to the 200-week SMA, I always favor a bounce and potentially an opportunity to buy if the asset has shown enough of a recovery.
However, by allowing the price to dictate a recovery, I also avoid getting caught in a fake bounce if Bitcoin breaks through the 200-week SMA and weakens further to $20,000 and beyond.
I don't hold Bitcoin, but I do have Ethereum and as well as a portfolio of IDOs. However, I use Bitcoin the same way I use the S&P 500 which is an indicator of market conditions.
The performance of Bitcoin in the coming weeks and months is of great interest to me because if the daddy of the crypto world recovers, so will the market as a whole and with that, a recovery in my portfolio.
For now, as you will have heard me say many times before, I am applying patience, a well-rewarded but under-appreciated investor skill.
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