This is a technical analysis article by Omkar Godbole, CoinDesk Analyst and Chartered Market Technician.
Bitcoin Prices are trading close to a key three-week-old long-term price line, making bulls nervous. However, shares of Strategy (MSTR), the largest publicly listed BTC holder, have fallen below this “safety net”, sending a bearish signal for the cryptocurrency.
That safety net is the 100-week simple moving average (SMA), which is an average of prices over roughly two years and is a trusted indicator for technical analysts across the market to identify major trend shifts and longer-term support or breakdown.
For Bitcoin, the 100-week moving average has held steady for three consecutive weeks, halting the decline from all-time highs above $126,000. Think of it like a safety net to catch falling objects from the sky. A rebound from the moving averages could spark hopes of a trampoline bullish rally.
But if the price breaks below, frustrated holders may sell more and bears gain confidence, triggering a deeper decline.
That’s exactly what happened to MicroStrategy stock in November, as shown in the chart below.
MSTR fell to $220 in early November, breaking above the 100-week moving average. The sell-off has since widened to $160. The stock is currently down more than 60% from its year-to-date high of $457.
This is crucial for BTC bulls as MSTR also led Bitcoin earlier when it fell below the 50-week moving average (another widely watched long-term average).
The key takeaway is that bulls must defend the 100-week moving average or else the price risks following the MSTR further lower. If the bulls manage to keep the price above the average, then this will boost hopes that it will act as a trampoline for a bullish rally.