This is a technical analysis article written by CoinDesk Analyst and Certified Market Technician Omkar Godbole.
Bitcoin is trading near a crucial long-term price line that holds for three weeks, putting bulls on alert. However, shares of the largest publicly traded BTC holder, Strategy (MSTR), have already fallen below this “safety net,” signaling bearish signals for the cryptocurrency.
That safety net is the 100-week simple moving average (SMA), the average price over approximately two years, and a reliable measure that allows technical market analysts to identify major trend changes and long-term support or breakdowns.
For Bitcoin, the 100-week SMA remained stable for three weeks, halting the decline from record levels above $126,000. Think of it as a safety net that catches a falling object in the air. A rebound from the average could raise hopes of a trampoline-like bullish rebound.
But if prices fall, frustrated holders could shed more while bears gain confidence, causing deeper declines.
This is precisely what happened to MicroStrategy shares in November, as the chart below shows.
MSTR fell to $220 in early November, penetrating the 100-week SMA line. Since then, the sale has been extended to $160. The stock is now down more than 60% from the yearly high of $457.
This is key for BTC bulls, as MSTR had also led bitcoin earlier when it fell below the 50-week SMA, another widely watched long-term average.
The key takeaway is that bulls must defend the 100-week SMA, otherwise prices risk following the MSTR’s path to deeper losses. If the bulls manage to keep prices above average, it would strengthen hopes that it will act as a trampoline for a bullish rebound.
