Bitcoin (BTC) has a better chance of bouncing back to $ 60,000 than falling below its current support level of $ 30,000 to target $ 20,000, believes Mike McGlone, chief commodities strategist at Bloomberg Intelligence.
A screenshot from McGlone’s latest flagship cryptocurrency analysis, first shared by Bloomberg Senior ETF Analyst Eric Balchunas, shows how he compares Bitcoin’s continued price movement to the “too cold” period of the 2018-2019 trading session.
Specifically, after falling over 80% in 2018, the BTC / USD exchange rate entered a prolonged period of consolidation near $ 4,000, but a sudden spike in 2019 drove its prices as high as 14,000 on some exchanges US dollars rise.
McGlone, known for his previous bullish calls on Bitcoin, noted that BTC, which has been consolidating near $ 30,000 since May, could see a similarly surprising rally as it aims to get near a renewed resistance target Reaching $ 60,000.
“The more tactical-trade-oriented bears appear to multiply when Bitcoin stays around 30% below its 20-week moving average, which gives buy-and-hold types time to accumulate,” the strategist wrote.
The moving average trio
Bitcoin’s bearish and bullish cycles appear to be wobbling around three major moving average indicators: the 20-week exponential moving average (20-week EMA; the green wave) which acts as preliminary support / resistance, the 50-week simple one moving average (50-week SMA; the blue wave) and the 200-week simple moving average (20-week SMA; the orange wave).
Bitcoin prices usually stay above the three moving averages during uptrends. Meanwhile, bear trends are seeing the cryptocurrency prices close below the 20-week EMA and 50-week SMA, as shown in the graph above.
The 200-week SMA is typically used as the last line of defense in a bear market. So far, Bitcoin has bottomed out twice near the orange wave, causing prices to skyrocket each time. For example, a take-off from the 200-week SMA in 2018 drove Bitcoin prices to nearly $ 14,000.
Similarly, wave support limited the cryptocurrency’s downward attempts during the COVID-19-led crash in March 2020. The price later rose from just $ 3,858 to over $ 65,000.
Bitcoin is now below this trend line for the third time since 2018. The cryptocurrency has broken below the 20-week SMA (nearly $ 39,000) and is now targeting the 50-week SMA (around $ 32,200) as support. If the old fractal repeats itself, it should continue to fall towards the 200-week SMA (around $ 14,000).
However, McGlone believes there could be an early recovery. The strategist pointed to the recent crypto ban in China as bullish fundamentals.
Tether takes the cake
Beijing announced a complete ban on cryptocurrency operations in May. The decision walled the country’s mining operations in, which were forced to either shut down their base or move outside. In response, Bitcoin prices have fallen sharply.
Still, McGlone highlighted China’s rejection of open source software crypto assets as a plateau in their economic rise. In a tweet posted on Friday, the analyst included an index that represents the booming volume and capitalization of US dollar-backed digital assets, including Tether (USDT).
He then compared the increasing demand for digitized dollars to the Chinese yuan-dollar exchange rates and found that the logarithmic scale of market capitalization fluctuations between the two fiat currencies was below zero between 2018 and 2020. This means that the yuan depreciated against the dollar.
The scale just returned to above zero, signaling that the yuan has grown against the dollar. But its uptrend still seemed dwarfed by Tether, whose market cap is up more than 40% above baseline. McGlone noted:
“China’s rejection of open source software crypto assets could mark a plateau in the country’s economic rise, we believe, as we boast the value of the US dollar and Bitcoin.”
Additionally, Petr Kozyakov, co-founder and CEO of the global payments network Mercuryo, noted that while the United States government has not officially adopted a central bank-backed digital dollar, as China has, the availability of many other alternatives – including Tether, USD Coin (USDC) and Binance USD (BUSD) – could pose a challenge to the China-controlled digital yuan.
“These cryptocurrencies are pegged 1: 1 to the US dollar, and as the graph shared by McGlone shows, the dollar is leading the digital advance against the Chinese yuan,” Kozyakov said.
“While China’s crackdown has affected the price of Bitcoin, which hit the 23rd […] Bitcoin should recover to $ 50,000 by the turn of the year. “
The Chinese economy will continue to grow
However, Yuriy Mazur of CEX.IO Broker rejected McGlone’s assumption, noting that the Chinese economy should continue to thrive with or without cryptocurrencies, saying it had nothing to do with the demand for digital assets.
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“The Chinese government is too smart to miss out on something the world considers valuable,” Mazur told Cointelegraph.
“So expect them to take significant action to introduce a yuan-backed cryptocurrency (in the future) that they have complete control over.”
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