November 28, 2022

  • The cryptocurrency bear market is likely to continue if Bitcoin confirms its recent crash below $20,000, according to Fairlead Strategies.
  • The technical analysis-based research firm said Bitcoin’s secondary support is $13,900.
  • “Short term momentum has turned negative with the new daily MACD ‘sell’ signal,” said Fairlead.

The cryptocurrency bear market is likely to continue as long as Bitcoin confirms its recent crash below $20,000, according to a note Tuesday from Fairlead Strategies.

The research firm that focuses on technical analysis highlighted that Bitcoin is currently testing a support range between $18,300 and $19,500 after the massive sell-off caused by the CPI last week. Bitcoin fell about 0.5% at $18,950 after the Federal Reserve announced a 75 basis point interest rate hike on Wednesday afternoon.

A confirmed break below this support range, represented by two consecutive weekly closes below $18,300, increases bitcoin’s downside risk to the secondary support level near $13,900, according to Katie Stockton of Fairlead. This represents a potential downside at 29% from current levels, and the weakness in Bitcoin is likely to spread to other cryptocurrencies.

“Long-term negative momentum is building up according to the monthly MACD chart, allowing long-term oversold conditions to be absorbed. As it stands, it could take months to make a meaningful shift,” Stockton said, referring to Moving Average Convergence Divergence Indicator. “Short-term momentum has turned negative for each new daily MACD ‘sell’ signal, which increases risks as long-term support is tested.

Bitcoin’s short, medium and long-term momentum signals have turned bearish amid the ongoing decline, and the rotation of the 50-day moving average indicates that the momentum may continue to the downside, according to Stockton.

Another bad sign for the cryptocurrency market as a whole is the fact that bitcoin has once again outperformed ether on a relative basis since early September.

Ether was in the sell mode after its successful merger, which turned the Ethereum blockchain into a proof-of-stake proof-of-work system. The drop in ether led Stockton to believe that there is an increased possibility that the cryptocurrency could test $1,000 as support, which represents a potential downside at 27% from current levels.

“The shift in favor of bitcoin is a bearish sign for crypto markets broadly, reflecting a defensive rotation as bitcoin and other altcoins enter a ‘re-test’ mode,” Stockton said.

But bitcoin could change its downward trajectory if it succeeds in avoiding a certain break below support and reclaiming resistance at $22,000, she said. Until then, expect the bear market for cryptocurrencies to continue.

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