On February 24, the Bitcoin shot above $ 4,000 for the fourth time this year. Although the price increase initially seemed to take place there was a severe correction later that day. This correction gives an important technical indicator, the moving average, a bear signal. The historical rates teach that if this indicator turns bearish, a bull rally with new record prices will follow. We explain it.
After the price of the Bitcoin broke for the fourth time this year the ‘glass ceiling’ of $ 4,000, – for the fourth time this year, a hefty price correction went down. Within 24 the price shot to $ 3,784.20 (the price at the time of writing). This strong correction ensures that an important indicator for technical analysis, the moving average, becomes bearish. The past teaches that this is oddly a good sign.
What is the moving average?
The moving average is a simple indicator that calculates the average price over an X number of days. The moving average over 50 weeks is now lower than the moving average over 100 weeks. We have seen this situation for the last time in April 2015.
What happens if the moving average becomes bearish?
If the moving average in the short term is worse than the long-term moving average, this usually means that the bears are at the end of their forces and that recovery is in sight. After the last time this happened, the price remained reasonably stable for a month or three (in a bandwidth of $ 300) before the bull market really erupted again in October 2015.
How big is the chance that we will see a bull market later this year?
Analysts consider that chance high. There are three reasons for this. First of all, these developments follow a historical pattern. In addition, the bull market moved in 2015 within a year before the second halving of the mining reward of Bitcoin took place. Once again, a mining halving is close by within a year. It is also striking that another indicator, the relative strength index (RSI), gives signals for an upcoming bull market. These theoretical assumptions are confirmed by practice. The fact that the price broke $ 4,000 this weekend indicates that there is a willingness to invest again in Bitcoin. Of course there are other experts who have a suspicion of how high that price should be.
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