The odds of a big decline are quite high for BTC after the token broke below its 50-week exponential moving average (EMA).
The last time this happened, the top crypto lost over 60% of its value, measured from the closing price of the week when the bearish breakout occurred.
BTC/USD Daily Chart (Coinbase)
An increase in the amount of stablecoins in circulation favours that view. Although that might not be the only reason why more USDC is flooding the market. New stablecoins could also be minted as a result of an increase in the rate at which institutions and individuals are embracing cryptocurrencies.
However, the timing is much more consistent with a flight-to-safety move at a point when fear is rampant.
It seems that a big volume of short positions was opened at that point as bears were positioning for an even stronger downturn. Nonetheless, this recent decline shows that bears were squeezed, which explains why BTC has bounced so strongly.
If history repeats and we get a downturn similar to the one seen in 2022, after BTC’s bearish breakout below the 50-week EMA, this means that the token could drop to around $35,000.
Hard to envision that possibility at these levels, but it has happened already once; it can easily happen twice.