This is a technical analysis post by CoinDesk analyst and chartered market technician Omkar Godbole.
bitcoin it is trading near a crucial long-term price line that holds for three weeks, making bulls nervous. However, shares of the largest publicly traded BTC holder, Strategy (MSTR), have already fallen below this “safety net,” showing bearish signs for the cryptocurrency.
This safety net is the 100-week simple moving average (SMA), the average price for approximately two years and a reliable metric for technical analysts across markets to identify major changes in trends and long-term supports or failures.
For bitcoin, the 100-week SMA has remained stable for three weeks, halting the decline from all-time highs above $126,000. Think of it as a safety net that catches an object that falls through the air. A bounce from the average could raise hopes of a springboard-like bullish bounce.
But if prices fall lower, frustrated holders can dump more while bears gain confidence, causing deeper declines.
That’s precisely what happened to MicroStrategy stock in November, as seen in the chart below.
MSTR fell to $220 in early November, penetrating the 100-week SMA line. It has since expanded the settlement to $160. The stock is now down more than 60% from its year-to-date high of $457.
This is critical for BTC bulls as MSTR had also led Bitcoin previously when it broke below the 50-week SMA, another widely watched long-term average.
The key takeaway is that bulls must defend the 100-week SMA, or prices risk following MSTR’s path to deeper losses. If the bulls manage to keep prices above average, it would strengthen hopes that it will act as a springboard for a bullish rebound.
