Bitcoin, the largest cryptocurrency, struggled to break the $90,000 threshold this week, facing renewed technical pressure. This pressure was highlighted by a concerning dip below the 50-week simple moving average (SMA), a long-term trend indicator. Analyst Ali Martinez pointed out that past cycles have seen an average decline of 54% following such a drop, suggesting a potential target around the $40,000 range. During this period, CryptoQuant data indicated that recovery attempts have been limited due to weak demand and a prevailing “Extreme Fear” sentiment.
Challenges in Overcoming the 50-Week SMA
In previous cycles where Bitcoin lost the 50-week SMA, the cryptocurrency experienced an average decline of around 54%. Historical comparisons based on current price levels have brought the $40,000 level back into focus. The 50-week SMA is monitored as a critical line separating bullish and bearish phases in the market, with persistence below it often associated with prolonged periods of weakness rather than short-term corrections.
Martinez, instead of predicting an immediate collapse, emphasized the growing risk. Failure to surpass the average in the coming weeks frames downward possibilities more convincingly. Weekly closings below this indicator strengthen a cautious stance on the technical side.
Insight From Blockchain Data
CryptoQuant noted that Bitcoin’s correction post-peak might be nearing a “late stage.” Demand weakness is constraining upward movements, and sentiment remaining at “Extreme Fear” levels suggests a lack of recovery in risk appetite. Although there are ongoing Spot Bitcoin ETF inflows, the limited price response feeds the perception that spot demand dynamics are not equally supportive.
Blockchain data indicates that the Coinbase Premium Index’s negative trend suggests weak U.S.-based spot demand. Slowing “whale” entries into major exchanges further indicate weak large-scale accumulation. CryptoQuant also monitors increased activity among 7–10-year-old BTC, which in the past has been seen before distribution phases or trend transitions.
The analysis firm’s general assessment leans towards a mild downward trend until demand indicators improve. Key areas to watch include whether the 50-week SMA is reclaimed, sentiment exits the “Extreme Fear” zone, and strengthening of spot demand signals.
Meanwhile, before any year-end “Santa rally” expectations could develop, a notable price anomaly occurred on the Binance exchange. In a matter of seconds, in the BTC/USD1 pair, Bitcoin dropped to $24,111 before rebounding above $87,500. The movement was confined to the USD1 pair, with no similar fall observed in other major BTC markets. For those unaware, USD1 coin is a new stablecoin associated with World Liberty Financial (WLFI) backed by the Trump family, and the pair quickly stabilized. Experts suggest this event was a liquidity-driven tremor that doesn’t alter the fundamental dynamics. João Wedson from Alphractal noted that similar atypical jumps are more frequent in bear markets.
