In a detailed analysis shared in May 2022, crypto market researcher Rekt Capital discussed the price movements of Bitcoin and the role played by the 200-week moving average (MA) in determining accumulation zones. This article expands and updates that analysis, diving deeper into the long-standing relationship between Bitcoin’s 200-week MA and its price history.
What you'll learn 👉
The Historical Role of 200-week MA
Traditionally, Bitcoin’s 200-week MA has served as a crucial pivot point for investors looking for long-term opportunities. Acting as an empirical floor for Bitcoin’s price, this MA has historically been a reliable indicator for identifying when the asset has bottomed out.
In March 2020, amid the global market meltdown, Bitcoin’s price did wick below the 200-week MA briefly. However, the price remained largely above this MA, affirming its support role.
A Shift in Dynamics: The Accumulation Area
However, recent market behavior has showcased a change in this long-standing principle. For the first time, Bitcoin’s price found its bear market bottom within an Accumulation Area—essentially a price zone where long-term investors amass or “accumulate” an asset—which was below the 200-week MA.
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Show more +This Accumulation Area was not derived arbitrarily; it was established by examining Bitcoin’s historical drawdowns that occurred following so-called “Death Crosses,” events in which a short-term MA crosses below a long-term MA, often signaling a bear market.
Role Reversal: 200-week MA as a Reference Point
In earlier cycles, the 200-week MA helped form the Accumulation Range, providing an essential benchmark for traders and analysts. It acted as a reference point for a Bitcoin breakout from this zone. Yet, time marches on, and the 200-week MA, being a dynamic indicator, now represents a higher price point.
Interestingly, Bitcoin has recently flipped the 200-week MA into a new resistance level, hinting at the possibility that its price could linger below this MA in the short to medium term.
Timeless Principle: High ROI Potential Below 200-week MA
Despite these shifts, the underlying principle seems unaltered: purchasing Bitcoin below the 200-week MA has historically yielded a high Return on Investment (ROI). Even as the MA transitions from being a point of support to potentially a new point of resistance, it continues to offer an advantageous buying opportunity for long-term investors.
In summary, while the 200-week MA’s role may have evolved, its status as a significant indicator for savvy, long-term Bitcoin investment strategies remains indisputable. The moving average continues to be a point of focus, even as Bitcoin charts a course through ever-shifting market conditions.
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