Bitcoin could establish a new all-time high above the $20,000 level in 2020 as it hits crossroads with a bias-defining indicator.
The benchmark cryptocurrency’s latest move uphill prompted it to retest its 20-weekly moving average on Wednesday. The technical indicator is conclusively accurate when it comes to defining bitcoin’s long-term trends. When the cryptocurrency breaks above the MA, it tends to stage parabolic bull runs, as shown in the chart below.
In April 2019, the bitcoin-to-dollar exchange rate closed above the yellowed 20-weekly MA for the first time in 15 months. The pair later rallied to the upside by circa 250 percent – from $3,858 to $13,868 on Coinbase exchange.
Before the wild upswing, staying below the 20-weekly MA kept bitcoin bearish. The cryptocurrency fell up to 72.96 percent after it first went under the indicator in January 2018 (the channel with redded trendlines). Prior to that, bitcoin had established its all-time high of circa $20,000 in 2017 while staying above the 20-weekly MA.
The Current Bitcoin Scenario
On Wednesday morning, the bitcoin-to-dollar exchange rate briefly went above the 20-weekly MA. The pair later corrected shyly, showing traders’ willingness to close their long positions near the MA curve.
In recent months, bitcoin has attempted to cross above the indicator on four occasions. The third week of October 2019, for instance, saw the cryptocurrency closing above the MA.
Nevertheless, the price rally fizzled as the anecdote that pushed it – China’s premier Xi Jinping’s endorsement of blockchain – lost its touch with day traders.
As of now, Bitcoin’s price rally has a powerful narrative backing it: an escalating geopolitical conflict between the US and Iran. The cryptocurrency’s first gains this year came on January 3, the day when a US-sponsored drone strike killed Qassem Soleimani, a top Iranian military official.
Analysts believe the conflict is leading investors and speculators to park their capital in perceived haven assets, including Bitcoin. First Block Capital Founder Marc van der Chijs weighed:
“Gold broke through $1,600 and Bitcoin now trades above $8,300 after Iran attacked the US. This confirms that BTC is increasingly seen as a safe haven.”
The narrative could push bitcoin above the 20-weekly MA. And with the cryptocurrency’s likelihood to hold the level owing to more bullish narratives (read Bitcoin Halving and Fed’s balance sheet), it could register fresh gains heading into the second quarter of 2020.
Risks
The only risk that remains is bitcoin’s acceptance of the 20-weekly MA as its medium-term resistance. A downside correction from the indicator could push the cryptocurrency back towards $6,400, as has happened in recent cases.
Part of gains could also evaporate if – like Xi Jinping news – traders’ focus shift from the US-Iran conflict.
Nevertheless, the best-case scenario shows bitcoin attempting a 250 percent jump in the long-term. That would bring its exchange rate close to $28,000.