October 6, 2022

  • The crypto bear market is likely to continue if bitcoin confirms its recent break below $20,000, according to Fairlead Strategies.
  • A technical analysis-based research firm said secondary support for bitcoin is $13,900.
  • “Short-term momentum has shifted to negative under a new daily MACD ‘sell’ signal,” Fairlead said.

The crypto bear market is likely to continue until Bitcoin confirms its recent break below $20,000, according to a note on Tuesday Fairlead Strategies.

A research firm focused on technical analysis noted that Bitcoin is currently testing the support range between $18,300 and $19,500 following last week’s CPI-induced selloff. Bitcoin fell about 0.5% to $18,950 after the Fed announced another 75 basis point rate hike on Wednesday afternoon.

A confirmed break below that support range, represented by two consecutive weekly closes below $18,300, increases downside risk for bitcoin to secondary support near $13,900, according to Fairlead’s Katie Stockton. That represents a potential 29% drop from current levels, and Bitcoin’s weakness would likely spread to other cryptocurrencies.

“Negative long-term momentum is building on the monthly MACD histogram, allowing longer-term oversold conditions to be absorbed. As it stands, it could take months for a meaningful change,” Stockton said, citing Moving average convergence-divergence indicator. “Short-term momentum has shifted to the negative under a new daily MACD ‘sell’ signal, increasing risk as longer-term support is tested.”

Bitcoin’s short-term, intermediate-term and long-term signals have all turned bearish amid the ongoing decline, and a reversal of its 50-day moving average suggests momentum could continue to the downside, Stockton says.

Another bad sign for the crypto market as a whole is the fact that Bitcoin is once again outperforming Ether on a relative basis since early September.

Ether was in sell-off mode after the successful merger, which switched the Ethereum blockchain to a proof-of-stake system with proof-of-work. Ether’s decline has led Stockton to believe there is an increased likelihood that the cryptocurrency could test $1,000 as support, representing a potential 27% decline from current levels.

“The shift in favor of bitcoin is a bearish indicator for cryptocurrency markets in general, reflecting a defensive rotation as bitcoin and other altcoins enter a ‘retest’ mode,” Stockton said.

But bitcoin may reverse its bearish trajectory if it successfully avoids a confirmed breakdown below support and regains resistance at $22,000, she said. Until then, expect the crypto bear market to continue.

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