Bitcoin risks slump after hitting ‘major bear market resistance’: CryptoQuant

Bitcoin is at risk of falling into a downtrend after its price hit a key historical “major bear market resistance level” based on its 200-day moving average, according to the crypto analytics firm CryptoQuant.

The cryptocurrency hit its 200-day moving average of $82,400 after rallying over six weeks since early April when it fell to $66,000, CryptoQuant said in a report on Wednesday.

“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,” it said. “The current setup raises the question of whether history repeats.”

Several traders have recently forecast a Bitcoin rally if the US Senate moves forward with the long-awaited CLARITY Act, while others have pointed to additional money printing in the US as a tailwind for Bitcoin this year. CryptoQuant's signals point to the opposite. 

Adding to CryptoQuant's bearish outlook, traders' unrealized profit margins reached 17.7% on May 5, their highest level since June last year, which the firm said indicated “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 said.

Bitcoin has fallen 2.3% in the last 24 hours to $79,300 after enjoying a rally since early April as traders returned to riskier assets on potentially easing Middle East tensions.

Bitcoin has also become increasingly sensitive to the US economy as Wall Street adoption has grown, with its latest dip coming after the US Labor Department said Wednesday that producer prices jumped 1.4% in April, the biggest increase in four years and another sign of rising inflation.

Traders may have already started taking profits, as the report said daily realized profits jumped to their highest level since early December last week, with traders cashing out 14,600 Bitcoin, currently worth nearly $1.2 billion, on May 4.

“Historically, spikes of this magnitude in bear market rallies have preceded local price tops,” CryptoQuant said.

It added that if Bitcoin falls, its current level of price support sits around $70,000, which is the average price at which all Bitcoin was last transacted.

“This level has historically acted as a key resistance-turned-support band during bear markets,” CryptoQuant said. “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.”

Other analysts have remained bullish on Bitcoin, with MN Capital founder Michaël van de Poppe posting on X on Wednesday that the cryptocurrency “might see a fast move” to $90,000 if the US Senate advances a long-awaited crypto bill dubbed the CLARITY Act.

Arthur Hayes, the investment chief of the crypto fund Maelstrom, said on Tuesday that Bitcoin retaking its all-time peak of $126,000 was a “foregone conclusion.” 

He predicted that the war in Iran and competition between the US and China over artificial intelligence would lead the government to increase the money supply, causing inflation that would push traders toward Bitcoin.