After a brutal 2022, the fact that we can even ask whether Bitcoin (BTC -6.31%) is back actually feels a little uplifting and almost like a victory. But when looking at some data on recent price action, the answer is a little more complicated than just a simple yes or no.
Like stocks or commodities, cryptocurrencies are just another asset. Therefore, we can look at dynamics around its price to get a better idea of current patterns, trends that occur as bear markets turn into bull markets, and whether now might be a good time to invest in Bitcoin.
More than a year in the making
One of the most widely used indicators to determine macro trends for any asset is the 200-day simple moving average (SMA). This metric takes the average price over the past 200 days and helps give a sense of whether an asset is trending for the better or worse. When Bitcoin's price is above the 200-day SMA, it is viewed as strong support, but when it falls, it turns into heavy resistance.
For just about all of 2022, Bitcoin's price was below the 200-day SMA and remained there for around 381 days. But just last week, it finally punched back through and now has climbed 39% since the beginning of the year.
It turns out that the 381 days Bitcoin was below the 200-day SMA are similar to the most recent bear market. During the crypto winter of 2018 and 2019, Bitcoin didn't beat the 200-day SMA for 386 days. When it did rise above that level, it made a considerable move during the next month and a half and went from around $4,000 in April 2019 to nearly $13,000 by mid-June -- a 222% increase.
A necessary grain of salt
Every time Bitcoin tops the 200-day SMA doesn't always mean a return to a bull market. After doing so in 2019, it has since risen above and below this level four other times.
The reason this most recent move is important, though, is that it represents the first time back above the 200-day SMA in more than a year. Although Bitcoin might flirt with this level multiple times in the coming days and months, it represents a significant shift for the better.
Although exceeding the 200-day SMA doesn't mean the bear market is over or a new all-time high will come anytime soon, historically it represents one of the best times to buy Bitcoin. This isn't to say we are trying to time the market. Rather, it's actually quite the contrary.
The goal of using this data is to measure risk. And with its most recent move above the 200-day SMA, the risk of investing today seems to be minimal, while upside looks increasingly more likely for long-term holders. With a renewed sense of momentum, Bitcoin's current price suggests that it is currently at some of its healthiest levels in more than a year.
