Key Insights
- The GMMA indicator that signaled bitcoin’s 70% price surge in October is about to flash a bearish signal.
- The impending bearish crossover suggests waning upside momentum after bitcoin’s stellar rally to nearly $49,000.
- Previous instances of the GMMA flashing bearish have led to prolonged bitcoin price declines.
AUSTRALIA – A technical indicator that signaled the start of bitcoin’s 70% price surge in October 2023 is about to flash a bearish signal, indicating waning upside momentum after the cryptocurrency’s stellar rally.
The Guppy Multiple Moving Average (GMMA) indicator, comprised of several short and long-term exponential moving averages, is used by traders to identify changes in the direction of price trends.
Is $49,000 the Peak For Bitcoin’s Current Rally?
The GMMA produced a bullish crossover in mid-October when bitcoin traded around $28,000, with its shorter-term EMA average moving above the longer-term average. That started bitcoin’s rally to nearly $49,000 by Jan. 11.
At press time, the indicator showed the short-term EMA average was close to crossing back below the long-term average, which would produce a bearish signal of downward price momentum ahead.
Bitcoin changed hands around $39,200 on Tuesday, having collapsed 14% from its 2023 highs amid a broader crypto market selloff.
Previous instances of bearish crossovers on the GMMA led to prolonged downtrends in bitcoin’s price. With the indicator about to flash another such signal, traders may prepare for further downside rather than betting on an extended rally.
Other market analysts have also warned of more pain ahead following bitcoin’s recent boom, citing still-elevated trader leverage and the potential for tighter Fed policy to sap investor appetite for risk assets.
For now, the GMMA suggests bitcoin’s medium-term trend remains upward biased. But the indicator’s impending bearish flip means the rally likely has its limits.