Bitcoin’s price is currently at a critical point, according to crypto analyst Benjamin Cowen. In a recent analysis, he discusses what needs to happen to spark the next major price increase. Let’s look at what he says by going into into the details and understand why this threshold is so crucial.
The Magic Number: The 20-Week Moving Average
Cowen, who has a YouTube channel with over 800,000 followers, highlights a specific technical indicator: the 20-week moving average (SMA). He believes this is the key to a potential rise in Bitcoin’s price.
Cowen draws comparisons with past bull markets, especially those of 2021 and 2013. In both cases, breaking and maintaining above the 20-week SMA led to substantial price increases. Cowen now observes similar patterns in the current market.
What Is the Simple Moving Average (SMA)?
The Simple Moving Average (SMA) is a widely used technical indicator in financial markets, including cryptocurrency trading. It calculates the average price of an asset over a specific number of periods, such as days or weeks. For example, a 20-week SMA would be the average price of Bitcoin over the past 20 weeks. The indicator helps smooth out price data to identify trends over time. By plotting the SMA on a chart, traders and analysts can better visualize the direction of an asset’s price movement, making it easier to spot potential support and resistance levels. It’s a valuable tool for making informed trading decisions.
What Needs to Happen for a New Rally?
According to Cowen, Bitcoin must not only break above the 20-week SMA but also maintain this level as support. If this happens, it could pave the way for a strong price increase, similar to the rallies seen several months after a halving event.
2013 as a Blueprint?
Cowen notes striking similarities to the price movements of 2013. Back then, it took about a month for Bitcoin to decisively break above the 20-week SMA. This was followed by a period of consolidation and then a strong rally in the fourth quarter.
What Does This Mean for Investors?
Technical analysis doesn’t provide guarantees but focuses on the probabilities of different scenarios. Cowen’s analysis suggests that breaking and holding the 20-week SMA could be a bullish signal for the mid-term. Whether to buy-or-sell now would depend on your strategy.