Rare technical signal has occurred twice in past two weeks
Bitcoin dipped below its 200-week simple moving average twice in the past two weeks, a rare occurrence that historically has preceded substantial gains, according to analysis by Thomas Perfumo, Chief Economist at Kraken.
The 200-week SMA stood at $62,358 as of the article’s publication, while Bitcoin was trading at $63,900. Closes below this level have been uncommon, occurring on only about 10% of trading days since mid-2017.
Perfumo examined historical returns following such dips. “Historically, buyers at this level have gone on to see median returns north of 113% over the following year and 313% over two years,” Perfumo said.
The 200-week SMA represents Bitcoin’s average price over that period and filters out day-to-day volatility to reveal the token’s long-term trend. Median returns, which Kraken used in its analysis, exclude outliers and extraordinary gains that can skew simple averages.
For investors who accumulated Bitcoin below the 200-week MA, recovery has been swift historically. “For those who accumulated below the 200-week MA, the median time to break even on their investment has been just two days, while the median maximum drawdown over the subsequent year has been only 9%,” Perfumo said.
Perfumo cautioned against treating historical performance as predictive. “Past performance is no guarantee of future results. But the historical record makes a clear case: at these levels, bitcoin has tended to offer immense value,” he said.
The analysis underscores the 200-week SMA’s role as a technical signal for long-term Bitcoin traders. The rarity of closes below this level, combined with historically positive median returns following such dips, has made the indicator a reference point in Bitcoin trading strategy discussions.
Kraken did not specify the exact dates of the two dips below the 200-week SMA in the past two weeks, nor did the exchange disclose the full historical data set or methodology used to calculate the median return figures.
