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▲ Bitcoin (BTC)/AI generated image ©
Contrary to the optimism in the virtual asset market, an analysis suggests that Bitcoin (BTC) is stuck in a technical resistance zone similar to the period just before past market crashes, as stablecoin dominance continues its structural strength.
Cryptocurrency analyst Benjamin Cowen stated in a video uploaded to his YouTube channel on May 20 (local time) that stablecoin dominance, estimated by the combined figures of Tether (USDT) and USDC, has broken through a strong support base formed over two years and is maintaining a structural uptrend with higher highs and higher lows. Cowen said, “An indicator that has formed a massive bottom built over two years does not end in a mere false breakout.” He diagnosed that the current trend suggests the possibility of a continued bear market in the virtual asset market.
Cowen noted that, contrary to investors' optimistic forecasts, the recent market rebound resembles a deceptive consolidation phase in past Bitcoin dominance. In the past, Bitcoin dominance temporarily retreated after an upward breakout, tested support levels, and then strengthened its upward trend again. Currently, stablecoin dominance has also dropped just below the 21-week exponential moving average and the 20-week simple moving average before turning upwards again. This signifies that stablecoin dominance has entered a retest phase, continuing its structural uptrend after a short-term correction.
The fact that Bitcoin's own dominance, excluding stablecoins, maintains an upward trend also indicates that liquidity is moving towards relatively safer assets than risk assets. Cowen explained that the current repeating pattern of stablecoin dominance is similar to the structure where Bitcoin dominance created a long-term uptrend, defying the expectations of investors who anticipated an altcoin bull run in the past. The analysis suggests that while the market anticipates an altcoin rebound, actual capital flows are leaning towards defensive assets.
Bitcoin's price movement is also repeating resistance patterns from past bear market cycles. Cowen pointed out that Bitcoin recently faced resistance at the 200-day moving average and was pushed back. This resembles the trend in the 2018 and 2022 bear markets when Bitcoin failed to break above the 200-day moving average and then sharply declined. He noted that rebound rallies in a bear market tend to progress slowly before collapsing quickly, and as long as stablecoin dominance confirms support at the 21-week moving average and continues its strength, further downward pressure on Bitcoin could increase.
Applying past trends, it's difficult to rule out the possibility that the current market is in the early stages of a sudden further downturn. Cowen mentioned that Bitcoin formed macro bottoms in June 2018 and June 2022 during its bear market cycles. Specifically, in 2018, after a short-term bottom in February, a higher low was made in April, but after being blocked by the 200-day moving average resistance in May, Bitcoin strongly broke below the previous February low in June. The analysis suggests that the current market could also be the starting point of a similar trend, and we should be wary of a worst-case scenario where Bitcoin breaks below its previous lows again.
*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*
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