The cryptocurrency market is notoriously volatile, but one key metric is currently flashing a historically bullish signal. Bitcoin (CRYPTO: $BTC) has been hovering near a critical level, which may prove to be a perfect entry point.
Thomas Perfumo, the Chief Economist at the crypto exchange Kraken, states the asset is flirting with its 200-week simple moving average. This moving average is around $62,000. Currently trading at about $64,000, Bitcoin is above that level for now, but it has dipped briefly below this average twice in two weeks, only to end up climbing back above it.
Investors may want to watch this level closely. Perfumo notes that Bitcoin has closed below its 200-week simple moving average on roughly 10% of trading days going back to the middle of 2017. Historically, those rare dips have created unusually compelling buying opportunities, with purchases near this level generating median returns of more than 113% over the following year and roughly 313% over two years.
Furthermore, downside risk has remained surprisingly limited during these exact windows. Perfumo noted that for investors accumulating below the 200-week moving average, the median time needed to break even was just two days. The median maximum drawdown over the course of the following year was also just 9%.
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While the past doesn't predict the future, for long-term investors, this can serve as an important reminder of why buying Bitcoin in times of adversity can be a good idea. The cryptocurrency has been having support at around $60,000, and that can be an encouraging sign that it may be stable for the time being. If you're considering buying Bitcoin, now may be an opportune time to do so.