In a tweet dated Feb. 2, on-chain monitoring resource Materials Indicators identified key levels of volatility to support after BTC/USD surged above $24,000.
Bitcoin price is preparing to face the trend line
In what was ultimately a boon for the Bitcoin bulls, the United States Federal Reserve delivered what risk-on traders wanted to hear on February 1st.
With President Jerome Powell using the word “lower inflation,” hopes immediately began betting that interest rates would be raised sooner, and that easier monetary conditions would return in place.
The mood was evident across cryptocurrencies, as BTC price action reversed an initial drop to see a fresh six-month high of $24,250 on Bitstamp.
While the subsequent correction sent the largest cryptocurrency down nearly $500, the mood has remained buoyant since then.
However, for the good times to continue, Material Indicators believes that BTC/USD should now contend with two trend lines, which have formed resistance for most of 2022.
These are the 50-week and 200-week moving averages (WMAs), with bulls failing to retest them so far, let alone reversing to support them.
The 50WMA and 200WMA currently stand at $25,345 and $24,837, respectively, as confirmed by data from Cointelegraph Markets Pro and TradingView.
Part of the comment stated: “[BTC] should test the major moving averages to confirm a macro breakout or a false breakout.”
The accompanying chart showed the state of the Binance order book at the time, with resistance turning upwards to allow the spot price to rally with it. As Cointelegraph reported, this phenomenon had already started before the Fed event.
BTC/USD (Binance) order book data infographic. Source: Material Indicators / Twitter
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Continuing, Material Indicators described the subsequent BTC price rally as a “herd of bulls scrambling through the gate” in the absence of resistance pressure.
“Whether it’s driving to the slaughterhouse or the auction house TBD’s 50WMA and 200WMA,” he added.
“Toby Banners” and “Overall Cards”
For now, BTC/USD has spent more time than ever before below the 200WMA, a key aspect of its 2022 bear market that sets it apart from others in its history.
Related: Best January since 2013? 5 things to know in bitcoin this week
Furthermore, the WMAs in focus are forming what is known as a “death cross”, as the bearish 50WMA crosses below the 200WMA.
Should this happen, analysts fear that it could generate a new downside, as was the case previously with events on lower timeframes,
“Risk assets are undoubtedly correlated, but BTC outperformed TradFi in January with a 40% rally,” commented Keith Allen, co-founder of Materials Indices, before the Fed.
“Now, SPX has a triple high on the month and Bitcoin is heading for a death cross on the weekly. Those are happy signs, but the Fed, Fang and the labor market are all dealing wild cards.”
1 week BTC/USD candlestick chart (Bitstamp) with 50, 200MA. Source: TradingView
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