A cross between two Bitcoin (BTC) moving averages that appeared before the 2020 price boom is hinting that it will return in 2021, just as the major cryptocurrency seeks a bullish breakout from its current $ 30,000 to $ 40,000 trading range.
The indicators in question are the MACD line and the Signal Line or ‘signal line’. MACD is an acronym for Moving Average Convergence Divergence, and a MACD Line represents the difference between the 12 and 26 period moving averages. For its part, the Signal Line is a moving average of nine periods.
By drawing the MACD line and the Signal Line together, the so-called MACD indicator is formed., which allows traders to predict future price trends. For instance, When the MACD line (a faster moving average) closes below the Signal Line (a slower moving average), it usually reflects an ongoing downtrend. On the contrary, the trend changes to bullish when the MACD line closes above the Signal Line.
The difference between the two moving averages forms a histogram. If the faster moving average moves away from the slower moving average, it indicates a MACD divergence. Similarly, when the faster moving average approaches the slower, the crossover is called MACD convergence.
Facing Bitcoin prices with the MACD
In 2020, Bitcoin prices reacted accurately to MACD crossovers. The graph below illustrates this correlation.
Recent bearish crosses between the MACD line and the Signal Line have led to declines. Similarly, the bullish crossovers have triggered massive spikes. The histogram indicator showed the strength of the bullish and bearish movements based on the difference between the MACD and the signal lines.
Now the histogram is recovering back to zero with the two lines looking at potential MACD convergence. The same fractal last appeared in March 2020. That followed a massive rise in Bitcoin’s price from $ 3,858 to around $ 65,000.
Preston Pysh, the founder of Pylon Holding Company, an equity investment firm, I was waiting for the déjà vu fractal of the MACD. The analyst tweeted:
The weekly BTC MACD is looking spicy. pic.twitter.com/6TvdV13yNc
– Preston Pysh (@PrestonPysh) August 5, 2021
“BTC’s weekly MACD looks spicy”
Furthermore, in a note published in July, Katie stockton, Founder and Managing Partner of Fairlead Strategies, wrote that Bitcoin’s “medium-term momentum” was improving thanks to the MACD histogram.
A decisive break is anticipated
But spot markets have largely ignored the long-term bullish outlook for Bitcoin as the asset repeatedly struggles to break above $ 40,000. Its previous attempts to extend its bullish momentum beyond said level have faced extremely high selling pressure.
Meanwhile, on a more positive note, an equally strong buying sentiment near $ 30,000 has capped Bitcoin prices from chasing deeper downtrends. As a result, equally assertive bulls and bears have trapped Bitcoin in the $ 30,000 to $ 40,000 price range.
Pankaj balani, CEO of Delta Exchange, expect a bullish breakout move in the Bitcoin market if you manage to stay above $ 40,000 for a week.
“In a definitive breakout of the $ 40K level, BTC could challenge the $ 48K level”said the executive.
“On the bearish side, traders will keep a close eye on the $ 36K level. In the event of a breakout below $ 36K, BTC can quickly move into a range of $ 28K – $ 32K.”
Bitcoin was trading at $ 40,723 at press time.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trade move involves risk, you need to do your own research when making a decision.