Bitcoin has seen its price plunge today by 13.5% at the time of writing on the back of a big slump in Japan"s Nikkei following news that the US could go into recession. While today"s crash in price is huge compared to previous downturns, there have been signs that Bitcoin has been teetering since the last week of June.
On June 24, a significant event happened to the price of Bitcoin, and that was that it closed below the 150-day moving average after previously dropping through the 50-day moving average, highlighting a lack of support at the levels those moving averages were at when the price fell through.
For those who are unaware, a moving average is a technical indicator that smooths the price action over a certain number of days, such as 50 days or 150 days. These moving averages sometimes act as support levels when the price is falling or resistance levels when the price is trying to go up.
Around the end of June and the start of July, Mt Gox, an old Bitcoin exchange, said it"d start refunding customers, which analysts said would add to selling pressure for Bitcoin and cause the price to go down.
Just after mid-July, Bitcoin did climb above the 150-day moving average, but by this time, the 50-day moving average had crossed below the 150-day moving average, which is a negative, bearish sign. These moving averages have remained crossed over since mid-July, and the price has plummeted.
Bitcoin"s current price levels have not been seen since February this year. Since then, it has passed $72,000 briefly and, over the last 150 days, has averaged at about $65,000.
While we don"t know for sure what Bitcoin"s price will do in the future, we can guess, based on the Relative Strength Index (RSI), that the price will continue to face downward pressure in the near future as the RSI moving average is well above (50.93) the RSI (22.41). If the price turns around, though, this might soon change.
For anyone planning to buy Bitcoin, ensure that you only spend what you can afford to lose, as it is very volatile.