Bitcoin (BTC), the digital currency that has been making waves in the financial market, experienced a price drop to $96,000 following the Federal Reserve’s recent decision to cut benchmark borrowing costs. This marked the activation of a crucial contrary indicator that has historically signalled the end of price pullbacks.
This Wednesday, the Federal Reserve took the expected move of cutting the benchmark borrowing cost. However, it only penciled in two rate cuts for 2025, a significant decrease from the four projected in September. The central bank emphasized its lack of interest in participating in a potential government plan to build a strategic BTC reserve.
In the wake of this announcement, BTC prices fell by over 8%, hitting lows around $96,000. At the time of writing, this cryptocurrency was trading near $97,500, marking nearly a 10% decline from the record high of $108,266 achieved earlier this week, according to CoinDesk data.
This loss led to the 50-hour simple moving average (SMA) dipping below the 200-hour SMA, indicating a bearish crossover. Although this pattern traditionally suggests a potential for a deeper pullback, it has not lived up to its reputation during the recent bull run.
During its post-U.S. election rally, Bitcoin saw its price jump from $70,000 to over $100,000 with a few pullbacks along the way. Each of these pullbacks ended with a bearish crossover of the 50- and 200-hour SMAs.
Therefore, the latest crossover offers hope to those bullish on Bitcoin who anticipate a renewed surge above the $100,000 mark.
However, a potential bounce could face resistance near the $10,600 level, identified by the descending trendline that represents the recent price drop. A breach of this level could pave the way for new record highs.
It is crucial to bear in mind that these patterns do not always play out as expected. The contrary indicator discussed earlier could fail, potentially leading to a further decline in price. The first sign of trouble would be if prices fall below the overnight low of $96,000. This could expose the swing low of around $91,000 recorded on Dec. 5.
While the future of Bitcoin remains uncertain, its current situation offers a fascinating insight into the dynamics of the cryptocurrency marketplace. As we move forward, it will be interesting to see how these patterns play out and what impact they will have on Bitcoin’s value.
