Since the market bottom in mid-June, the digital currency market has largely been tracking the movement of the stock market.
Both markets were finally able to stabilize and head higher last month.
The S&P 500 rallied as much as 19%, while Bitcoin — the world’s biggest digital currency by market cap — jumped over 43%.
So, does that mean that the Bitcoin bear market is behind us? I don’t think so…
Bears on the Prowl
As you can see in the daily chart of Bitcoin below, the market remains weak.
While other digital currencies, such as Ethereum, have rallied over 100% since their lows, Bitcoin is lagging.
After last week’s big drop, Bitcoin is up just 22% from its recent low, which doesn’t show much strength by the bulls.
You can see that the rebound rally didn’t even make it up to the bottom of the prior consolidation range (top dashed line).
Instead, all the bulls could muster up was a push to the May low around $25,300, which was quickly rejected.
Losing the Moving Averages
Now, looking at the daily chart with moving averages (MAs), you can see that Bitcoin made an initial push above its 50-day MA (red line) back in mid-July…
The first attempt was rejected, but the bulls made a second attempt a few days later and were able to push through.
It looked like price was going to hold above the 50-day MA and potentially move higher.
However, the bulls rolled over last week as Bitcoin dropped 11.5%.
The drop also did some damage to the weekly chart, as Bitcoin is now back below its 200-week MA…
You can see how price tested the underside of the 50-week MA (red line) back in March and failed to break through.
And as I just mentioned, price is now back below the 200-week MA (blue line) following a weak attempt to hold above it.
Drop Not Done
Folks, I know it may be tempting to try to pick a bottom in the digital currency market.
And I understand that the gains on the bull side are enticing. But these are all signs of a classic bear market.
And in my view, the potential reward still doesn’t outweigh the risk of further downside at this time.
If the recent lows are taken out, there’s not much to support the price until it gets to the $10,000-$12,000 area.
Which means that Bitcoin, which is already down 70% from its all-time high, could stand to fall another 40%-50%.
I’ll be sure to keep you updated as this situation progresses…
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Embrace the surge,
Editor, Stock Surge Daily