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While Bitcoin (BTC) continues to lose crucial support levels, an analyst has shared three possible scenarios for the flagship crypto’s upcoming performance, raising the alarm about potential early signs of a bear market.
Bitcoin Price Correction Continues
On Monday, Bitcoin reached a new multi-month low after dropping below $93,000 for the first time since May. The cryptocurrency started the week dropping nearly 5% from the $96,000 area and retesting the $91,000 level as support.
Notably, BTC has seen a 16% correction from its November opening and has lost multiple crucial levels over the past few weeks, including the $100,000 psychological barrier and the 21-Week Exponential Moving Average (EMA) as support.
Most recently, the flagship cryptocurrency closed the week below the 50-week EMA, which has raised the alarm for several market observers.
Analyst Rekt Capital noted that losing this indicator is “not something we typically want to see if bullish Market Structure is to remain intact,” adding that “bear markets tend to confirm when price loses the key bullish levels that have supported upside momentum across the cycle.”
He explained that Bitcoin has formed clusters of lower lows at the 50-Week EMA across the cycle, which have “helped sustain a broader bullish technical uptrend.” However, BTC is currently forming another cluster below this indicator, instead of approaching the possible macro lower high developing above the 50-Week EMA.
As a result, BTC’s recent performance signals the first step of a potential breakdown, the analyst warned:
A full breakdown unfolds in three parts: first, a Weekly Close below the key level; second, a post-breakdown relief rally that turns that level into new resistance; and third, downside continuation that completes the bearish confirmation.
Early Signs Of A Bearish Trend?
Rekt Capital stressed that the 50-week EMA will be crucial in determining whether BTC’s bullish trend and tendency for “benign downside deviations” still hold.
He emphasized that if the flagship crypto fails to reclaim this indicator as support and it turns into a resistance, it could be transitioning from its downside deviation tendency to the early stages of a confirmed bearish trend.
The analyst detailed that during the early bear markets, “a Weekly Close below the 50-Week EMA is followed by several weeks of post-breakdown relief rallies into that moving average, but those attempts ultimately fail, and the EMA simply acts as resistance until downside acceleration unfolds.”
Based on this, he shared three potential outlooks for BTC’s performance. The best-case scenario for Bitcoin would be reclaiming this indicator and successfully ending this correction as a downside deviation, as it would suggest that BTC remains in a bull market.
The second-best case scenario would be that Bitcoin sees a multi-week hesitation period below the EMA as it enters the bear market, which could include a brief overextension above this level before a clearer trend resolution to the downside.
Meanwhile, the worst-case scenario would see the cryptocurrency’s price unable to retest the 50-Week EMA, even as resistance, and directly enter the downside acceleration phase.
Nonetheless, the analyst noted that, historically, the third scenario doesn’t appear as likely if we have already entered a bear market. Instead, he concluded that the recurring “relief-rally scenario” into the 50-week EMA before downside continuation seems more likely.
