Bitcoin Faces $88,356 Resistance, 200-Day SMA Key
2min read Bitcoin's recent bullish momentum has encountered a significant resistance zone above $88,000, marked by several critical levels that could determine the trajectory of the ongoing recovery rally. The first and most crucial level within this resistance cluster is the 200-day simple moving average (SMA) at $88,356. This indicator is widely recognized as a key measure of long-term momentum. Earlier this month, institutional analysts noted that the downside break of the 200-day SMA in March signaled the potential onset of a crypto winter. Therefore, a fresh move above this level could indicate a renewed bullish shift in momentum.
Additionally, a move above the 200-day SMA would trigger a dual breakout, as the Ichimoku cloud's upper end is located close to the 200-day SMA. The Ichimoku cloud, developed by a Japanese journalist in the 1960s, is a technical analysis indicator that provides a comprehensive view of market momentum, support, and resistance levels. It comprises five lines: Leading Span A, Leading Span B, Conversion Line or Tenkan-Sen (T), Base Line or Kijun-Sen (K), and a lagging closing price line. The difference between Leading Span A and B forms the Ichimoku Cloud. A move above the Ichimoku cloud is also said to reflect a bullish shift in momentum.
The third and final level forming the resistance cluster is the high of $88,804 on March 24, from where the market turned lower and fell back to $75,000. This level represents a significant psychological barrier for traders, as it marks the peak of the previous rally before the market correction.
Behavioral aspects of trading come into play when an asset approaches a resistance zone, especially at key levels like the 200-day SMA and the Ichimoku cloud. Prospect theory suggests that people are typically risk-averse with respect to gains and risk-seeking with respect to losses, known as the “reflection effect." This means that traders tend to be risk-averse while locking in profits and keep losing trades open. This tendency is amplified when an asset encounters a significant resistance zone. Traders who entered the bitcoin market around $75K, anticipating a rebound, may feel pressured to take profits as the price approaches this resistance. Such selling could, in turn, slow the price ascent or even trigger a new downturn.
Conversely, if bitcoin successfully breaks through the resistance zone, the fear of missing out could prompt more traders to make bullish bets, further fueling bullish momentum and pushing the price higher. The outcome of this resistance test will be crucial in determining the short-term direction of bitcoin's price. If the resistance holds, it could lead to a period of consolidation or even a correction. However, if bitcoin manages to break through, it could signal the start of a new bullish phase, with the potential for further gains.
