What has been a tumultuous last few months for crypto markets has only accelerated through the turn of the New Year. Several of the key support levels for both Bitcoin and Ethereum I highlighted in my initial crypto market outlook have since been breached and unsurprisingly ushered in further negative price action to the downside. Bitcoin now resides on what can only be described an incredibly important level of support at $40k-$42k. For dip-buyers and long-term holders alike this is almost a must buy level as its importance as both resistance and support throughout 2021 has been paramount and thus could well be a level Bitcoin consolidates and bounces from. However, as I will cover off within this article, not all of the signs are there for a meaningful market bottom.
Beginning with the long-term technicals for BTC per the weekly chart, what is of concern is the recent price action has taken us meaningfully below the 50-week moving average. This moving average has provided key support since the mid-2021 lows and any meaningful close below would be the first since March of the 2020. By simply examining the weekly chart it looks as if we could easily see the price fall back to the $30k area. If we do enter a sustained bear market for crypto in the latter parts of 2022 I would not be surprised if this level is reached. Such an outcome would not doubt provide an excellent long-term buying opportunity for those bullish digital assets.
What also concerns me regarding the recent price action is we are yet to see a spike in downside volume that would usually accompany downside capitulation representative of a sustainable bottom. Although we have seen such volume spikes to the downside in all meaningful market bottoms over recent years, it must be said of course that bottoms can form without such movements in volume. This is certainly is something investors should keep an eye on nonetheless.