Research Highlights Bitcoin’s Long-term Recovery Linked to Nasdaq’s Trend
Market Update
The long-term recovery of Bitcoin (BTC) is closely tied to the Nasdaq’s ability to trend upward, as stated by Ecoinometrics. Unfortunately, the Nasdaq triggered a major bearish reversal pattern, known as a "double top," on Monday, putting BTC’s 200-day simple moving average (SMA) support at risk.
Market Analysis
Bitcoin, the leading cryptocurrency by market value, has dropped over 10% in the past 24 hours, reversing Sunday’s price rally to $95,000. At one point early today, prices tested the 200-day SMA support at $82,587, as shown by data from the charting platform TradingView.
Technical Analysis
The 200-day SMA is a key indicator of long-term trends, with price declines below this level often signaling potential significant losses ahead. The possibility of BTC’s price moving below the long-term average cannot be ruled out, as Wall Street’s tech-heavy Nasdaq fell 2.2% on Monday, triggering a double top breakdown.
Double Top Breakdown
A double top comprises two peaks separated by a trough, and takes roughly two to six weeks to form. The gap between the two peaks must be equal to or less than 5%, with the spread between peaks and the trough being at least 10%, according to technical analysis theory.
Nasdaq’s Decline
Nasdaq has formed two peaks near $22,200 since mid-December, with a trough at $20,538. The index ended Tuesday below the trough support, confirming the double-top bearish reversal pattern.
Potential Consequences
Per technical analysis theory, the subsequent decline could be at least 70% of the distance between the peaks and the trough, which means the Nasdaq could go as low as 19,400. The pattern’s historical failure rate is 11%, according to CMT’s analysis books, meaning breakdowns lead to deeper losses more often than not.
Conclusion
The recent decline in both Nasdaq and Bitcoin’s prices, along with the double top breakdown, has significant implications for the long-term recovery of the cryptocurrency. As the 200-day SMA support is at risk, investors are advised to exercise caution and closely monitor market developments.
FAQs
Q: What is the significance of the 200-day SMA in technical analysis?
A: The 200-day SMA is a key indicator of long-term trends, with price declines below this level often signaling potential significant losses ahead.
Q: What is a double top breakdown?
A: A double top breakdown is a bearish reversal pattern that occurs when the price of an asset falls below the support level after forming two peaks separated by a trough.
Q: What is the historical failure rate of double top breakdowns?
A: According to CMT’s analysis books, the historical failure rate of double top breakdowns is 11%, meaning breakdowns lead to deeper losses more often than not.
