Bitcoin is STILL in a precarious position.
The King of Cryptocurrencies hasn’t done much since we last looked at it in late April. Bitcoin was trading near $64,000 at that time. It closed near $64,000 last Friday.
So, the “Sell in May and go away” philosophy we applied to Bitcoin hasn’t quite panned out yet. But, the setup for a seasonal decline is still intact.
Take a look at this updated chart…
The squiggly, colored lines on the chart are the various moving averages we use to track the action in Bitcoin. The red circles show the times when those moving averages shifted to a bearish configuration – with the 9-day EMA trading below the 20-day EMA, and the 20-day EMA below the 50-day MA.
The three previous times the moving averages turned bearish, Bitcoin immediately sold off. It fell 17% in one month last August. Bitcoin fell 8% in two weeks back in January. And, as we turned cautious on the King of Cryptocurrencies in April, it dropped 11% in just three weeks.
Of course, these short-term disruptions shouldn’t matter too much to folks who believe Bitcoin is headed to $100,000 by the end of the year, or $500,000 in five years, or whatever upside target the most bullish of the diamond-hands crowd is projecting.
As a trader, though, it sure looks to me as though the immediate momentum has shifted bearish. The price of Bitcoin is more likely to be lower a few weeks from now than where it is today.
Another concern for Bitcoin bulls should be its inability to rally in the current market environment.
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Speculators have pumped up the prices of meme stocks, like GameStop (GME). They’ve pushed penny stocks higher – with many “sketchy” stocks gaining triple digits in a day (and often giving up those gains the next day).
And, they’ve chased the skyrocketing action in the Artificial Intelligence companies.
Bitcoin, as the ultimate arbiter of risk-on/risk-off, should be screaming higher in this environment. Its relative underperformance is a giant caution flag. It could be signaling a big, risk-off event.
Keep a close eye on the above chart in the coming days. If Bitcoin breaks below the support of the $62,000 level it could signal the start of a larger move lower – perhaps to the next support line near $52,000.
Best regards and good trading,
Jeff Clark
Editor, Market Minute