Bitcoin (BTC) faces a wash-or-swim resistance test to confirm its “macro breakout,” says a new analysis.
In a chirping On February 2, chain monitoring resource Material Indicators flagged key levels to turn into support after BTC/USD rose above $24,000.
Bitcoin price gears up for trendline showdown
In what was ultimately a boon for Bitcoin bulls, the US Federal Reserve delivered what risk traders wanted to hear on February 1st.
When Chairman Jerome Powell used the word “disinflation,” hopes immediately began betting that interest rate hikes would end sooner and that easier monetary conditions would return in their place.
Sentiment was palpable across crypto, with BTC price action reversing an initial drop to see new six-month highs of $24,250 on Bitstamp.
While a subsequent correction took the biggest cryptocurrency around $500 lower, sentiment has since remained up.
However, for the good times to continue, Material Indicators believes that BTC/USD will now have to deal with two trend lines, which have formed resistance for much of 2022.
These are the 50-week and 200-week moving averages (WMA), with bulls failing to retest them so far, let alone turn them to support.
The 50WMA and 200WMA currently stand at $25,345 and $24,837, respectively, data from Cointelegraph Markets Pro and TradingView confirms.
“[BTC] must test key moving averages to confirm macro breakouts or fakeouts,” says part of the commentary.
An accompanying chart showed the state of the Binance order book at the time, with resistance shifting higher to allow the spot price to rise with it. As Cointelegraph reported, this phenomenon had already played out before the Fed event.
Continuing, Material Indicators described the subsequent BTC price rally as a “Herd of Bulls Stampede Through the Gate” in the absence of resistance pressure.
“Whether it leads to the slaughterhouse or the auction house TBD at 50WMA and 200WMA,” it added.
“Toppy characters” and “wildcards”
Currently, BTC/USD has spent more time than ever below the 200WMA, a key aspect of the 2022 bear market that set it apart from others in history.
Related: Best January since 2013? 5 things to know in Bitcoin this week
Furthermore, the two WMAs in focus form what is known as a “death cross”, where the falling 50WMA crosses below the 200WMA.
Should this pan out, analysts fear it could lead to new downsides, as was previously the case with events on lower timeframes,
“No doubt risk assets have been correlated, but BTC outperformed TradFi in January with a 40% rally,” Material Indicators co-founder, Keith Alan, commented before the Fed.
“Now the SPX has a triple top for the month and BTC is headed for a death cross for the week. These are top signs, but the FED, FANG and the labor market share wild cards.”
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