CryptoQuant warns Bitcoin faces potential downturn after reaching 'critical bear market resistance'
According to CryptoQuant, Bitcoin may enter a downward trajectory following its encounter with a crucial resistance point, coinciding with trader unrealized gains reaching their peak in almost twelve months.
The leading cryptocurrency faces the possibility of entering a downward trajectory following its encounter with a significant historical "major bear market resistance level" determined by its 200-day moving average, as reported by crypto analytics platform CryptoQuant.
Following a six-week surge that began in early April when the digital asset dropped to $66,000, Bitcoin reached its 200-day moving average of $82,400, according to a Wednesday report from CryptoQuant.
The 200-day MA [moving average] was a major resistance in the 2022 bear market: the price resumed its downward trend after hitting it in March of that year. The current setup raises the question of whether history repeats.
While some market participants have recently predicted a Bitcoin surge should the US Senate progress with the highly anticipated CLARITY Act, and others have highlighted increased monetary expansion in the United States as a positive catalyst for Bitcoin throughout this year, CryptoQuant's indicators suggest a different scenario.
Further reinforcing CryptoQuant's pessimistic perspective, unrealized profit margins among traders climbed to 17.7% on May 5, marking their peak level since June of the previous year, which the analytics firm interpreted as signaling "potential selling pressure to take profits."
These margin levels mirror those seen in March 2022, precisely when Bitcoin last tested the 200-day MA before resuming its decline.
CryptoQuant
The cryptocurrency has declined 2.3% over the past 24 hours to $79,300 following a positive run since early April as market participants shifted back toward higher-risk investments amid potentially diminishing tensions in the Middle East.
The digital currency has also demonstrated growing sensitivity to economic conditions in the United States as Wall Street integration has expanded, with its most recent decline occurring after the US Labor Department announced Wednesday that producer prices surged 1.4% in April, marking the largest increase in four years and providing another indication of escalating inflation.
Market participants may have already begun securing their gains, as the analysis indicated that daily realized profits surged to their highest point since early December during the previous week, with traders liquidating 14,600 Bitcoin, presently valued at approximately $1.2 billion, on May 4.
Historically, spikes of this magnitude in bear market rallies have preceded local price tops.
CryptoQuant
The firm further noted that should Bitcoin experience a decline, its present support level lies in the vicinity of $70,000, representing the average price point at which all Bitcoin was most recently traded.
This level has historically acted as a key resistance-turned-support band during bear markets. It represents the average cost basis of short-term traders and the level at which unrealized profit margins compress back toward zero, reducing the incentive for further selling.
CryptoQuant
Meanwhile, other market observers have maintained optimistic projections for Bitcoin, with MN Capital founder Michaël van de Poppe sharing on X on Wednesday that the digital currency "might see a fast move" to $90,000 should the US Senate push forward with a highly anticipated cryptocurrency legislation known as the CLARITY Act.
Arthur Hayes, the investment chief of the crypto fund Maelstrom, stated on Tuesday that Bitcoin reclaiming its all-time peak of $126,000 was a "foregone conclusion."
His forecast suggested that the conflict in Iran and rivalry between the US and China concerning artificial intelligence would compel the government to expand the money supply, generating inflation that would drive traders toward Bitcoin.