The historical trend of the 200-day and 600-day MAs could indicate that Bitcoin could see another major decline in the near future.
The current bitcoin pattern has historically resulted in a major price drop
As one analyst pointed out in a CryptoQuant post, the current bitcoin price appears to be sandwiched between the 200-day and 600-day MA curves.
A “moving average” (or MA for short) is an analytical tool that averages the price of Bitcoin over any desired range. As the name suggests, this average is constantly updating itself as each day goes by and new prices are observed.
The main benefit of an MA is that it smooths out any local price fluctuations and displays the trend as a smoother curve. This makes the tool very useful for studying long-term trends where daily price changes are not that important.
Related Reading | Bitcoin LTHs are now holding significantly more losses compared to May-July 2021
An MA can be applied to any period. For example a week, a hundred days or even just a minute. The chart below shows the trend of the 200-day and 600-day Bitcoin MAs over the past few years.
BTC price currently seems to be sandwiched between the two moving averages | Source: CryptoQuant
As you can see in the chart above, a trend has occurred in relation to these MAs and the bitcoin price after previous all-time highs.
It seems like in 2014 and 2018, after the respective ATHs formed and the price went down, the price was pushed down for a period between the 200-day and 600-day MAs.
Related Reading | Why a “boring” bitcoin could be a good thing
After staying in the region for some time, the MAs crossed and the crypto witnessed a large drop in its price. While this was happening, bitcoin volume also experienced a downtrend.
Now it looks like a similar pattern is emerging this time as well. The price has been falling since the ATH in November and is now stuck between the two MAs.
If the pattern holds and the moving averages cross again, then another major drop in Bitcoin’s value could be imminent.
BTC price
At the time of writing, the price of Bitcoin is hovering around $40.4K, up 1% over the past seven days. Over the past month, the crypto has lost 1% in value.
The chart below shows the evolution of the coin’s price over the last five days.
The price of BTC seems to have dropped sharply over the past day | Source: BTCUSD on TradingView
Bitcoin showed strong bullish momentum a few days ago as it appeared to be heading towards another retest of $43,000. However, before such a revisit, the price crashed in the last 24 hours.
Featured image from Unsplash.com, charts from TradingView.com, CryptoQuant.com
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