Crypto analyst Benjamin Cowen believes that Bitcoin (BTC) could be on the brink of a substantial correction, drawing insights from its historical price movements.
In his latest strategy session, Cowen, followed by a substantial audience of 788,000 on YouTube, points out a key indicator – Bitcoin’s 100-week simple moving average (SMA).
Cowen observes that whenever Bitcoin has surpassed its 100-week SMA in the past, it has tended to retrace its steps and retest this level before resuming its upward trajectory. With Bitcoin having recently crossed above the 100-week SMA, Cowen suggests that history might repeat itself with a potential downside risk.
Additionally, Cowen emphasizes that the actions of the Federal Reserve could play a pivotal role in determining whether Bitcoin will find support at the 100-week SMA.
He elaborates, “Historically, at this point in the cycle, and sometimes even later, we’ve seen a retest of that 100-week moving average. It’s a phase in the cycle that we acknowledge. In 2016, we didn’t experience a hard landing. It could be described as a soft landing. While there were recession concerns, we didn’t see a recession. We did, however, witness a retest of the 100-week SMA, and Bitcoin continued its ascent. In the previous cycle, we retested it, received a bounce, but ultimately, the price fell through.”
Cowen concludes by speculating that in the early months of 2024, we may witness a backtest of the 100-week moving average, and whether it holds or not will likely hinge on whether the Federal Reserve achieves a “soft landing” or faces a scenario akin to the last cycle.
At the time of writing, Bitcoin is trading at $42,297, which represents a 36% increase over its 100-week SMA.