Bitcoin’s steep price discount seems similar to March 2020 bottom

Bitcoin traded at a significant discount to its long-term moving average earlier this week, implying an overstretched bearish move and potential for reversal higher.

The cryptocurrency dropped to nearly $30,000 on Tuesday, pushing the ratio to its 20-week simple moving average (SMA) down to 0.61, the lowest since the March 2020 crash.

Historically, bitcoin (BTC, -1.37%) has carved out major price bottoms with the ratio near 0.60.

“Our graphic depicts bitcoin at the steepest discount to its 20-week moving average since the March 2020 bottom around $4,000,” Bloomberg’s Mike McGlone said in a research note published on June 9. “A more enduring discount at the end of 2018 marked the low closer to $3,000.”

Bitcoin price discount to 20-week SMA
Source: Bloomberg Intelligence, Mike McGlone

If past data is a guide, Tuesday’s low near $30,000 could also turn out to be a bear-market bottom. Bitcoin has bounced up slightly over the past three days to near $37,000, but remains well under the 200-day SMA at $42,000.