Bitcoin Price Analysis: 20-day SMA Prevents BTC From Drastic Drops

Last Updated July 23rd 2021
5 Min Read

Daily Bitcoin BTC Price Forecast
  • Bitcoin price failed to fulfill the bearish cross in the 4-hour time frame.
  • The IOMAP shows two strong resistance barriers at $38,000 and $40,000.

After dropping from the $40,000 resistance barrier on January 10, Bitcoin price dropped down to $34,000 over the next four days before finding support at the 20-day SMA. The price then rose up to test the $40,000 barrier again before it promptly dropped back to the 20-day SMA.

 

20-day SMA Holds BTC Up

Over the last four days, the 20-day SMA has managed to hold the Bitcoin price up. While the MACD shows sustained negative momentum, the 20-day SMA ($35,600) has refused to relent under this bearish pressure.

btc/usd  daily chart 011921

Image: BTC/USD daily chart

A closer look at IntoTheBlock’s IOMAP shows us why this support barrier has been so strong. Previously at this level, 746,000 addresses had purchased 382,500 BTC tokens. As such, this line is robust enough to absorb a tremendous amount of selling pressure.

btc/usd volume chart 011921

Image: IntoTheBlock

The 4-hour chart presents an optimistic viewpoint to the holders. Firstly, the MACD shows increasing bullish market momentum, which should hint at an upcoming Bitcoin price jump. Secondly, the 50-bar SMA was on the verge of crossing over the 20-bar SMA to form a bearish cross pattern. However, it seems like these two technicals has diverged away.

btc/usd 4-hour chart 011921

Image: BTC/USD 4-hour chart

 

Overall Bitcoin Price Sentiment Looks Bearish

Finally, the following chart taken from IntoTheBlock helps us visualize the number of addresses entering the protocol daily. As you can see, the number of addresses has dipped considerably from 685,400 on January 7 to 470,450 on January 17.

bitcoin addresses chart 011921

Image: IntoTheBlock

This shows us that the overall network is weakening considerably with lesser addresses willing to join the protocol.

 

Former Canadian PM Praises Bitcoin

Former Canadian prime minister Stephen Harper recently said that there’s a chance Bitcoin and central bank digital currencies (CBDC) can serve as reserve currencies to replace the dollar. In an interview with Cambridge House’s Jay Martin, Harper considered the possibility of the USD being replaced by large currencies like the Euro or Chinese yuan. 

Harper expressed his doubts about either of the currencies being a viable alternative currency because of the long-term uncertainty over the Euro's value and the "arbitrary measures" the Chinese government would take concerning the value of the yuan. 

It’s hard to see what the alternative is to the U.S. dollar as the world’s major reserve currency. Other than gold, Bitcoin, a whole basket of things [...] I think you’ll see the number of things that people use as reserves will expand, but the U.S. dollar will still be the bulk of it.

The ex-prime minister went on to say that he thought CBDCs were to some extent “inevitable” but would likely be subject to monetary policy around the world. Furthermore, Harper said that he was concerned about central banks becoming "kind of a general banker" rather than just a financial monitor. This could affect the rollout of any CBDC. He added:

Ultimately, if you have a digital currency and the purpose of the central bank is to control inflation and create a stable currency and priceability, then the digital currency is just kind of an evolution of the marketplace. 

On the other hand, if CBDCs are just “wild experiments” to decide the role of central banking, then Harper said that he’d be worried. 

 

Former U.S. Treasury Secretary: BTC Is “Here To Stay”

In a recent interview on Bloomberg TV’s “Wall Street Week,” Dr. Lawrence H Summers, former US Treasury Secretary, shared his Bitcoin views. Summers said that he believes Bitcoin is a resilient asset and “is here to stay.” 

I think some institutions like it [Bitcoin], is here to stay. I don’t think that the whole thing is going to collapse. I think that having run up and then run way down, and then move back, it looks much more resilient, and therefore I think people are going to move towards it, and as people move towards it, given the finiteness of its supply, that’s going to be a factor working to raise prices

In 2016, Summers had said that he disagreed with JPMorgan Chase CEO Jamie Dimon’s comment (made in 2015) that “no government will ever support a virtual currency that goes around borders and doesn’t have the same controls.” Summers had said: 

Jamie’s a smart guy… But Bill Gates is a smart guy too and he said the internet’s not going anyplace. 

Dr. Summers is one of America’s top economists. He served as the Director of the White House National Economic Council in the Obama Administration and as the President of Harvard University and working as the Chief Economist of the World Bank. 

 

Bitcoin Price Is Expected To Reach What Levels?

If Bitcoin price continues to test the 20-day SMA and eventually breaks down, it may drop to the 50-day SMA ($27,350). On the upside, the BTC price bulls face strong resistance at the $38,000 mark.

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