Bitcoin (BTC) is at a technical crossroads after losing a crucial support level, leading some market observers to suggest this week’s price will be decisive in whether the flagship crypto can regain upward momentum or extend its recent losses.
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Bitcoin 21W EMA retested to be decisive
After closing the week at around $77,450, Bitcoin started the new week with a decline to a new local low of $76,050. The cryptocurrency traded between $76,300 and $82,500 during the May rally and failed to break out of the crucial resistance despite multiple attempts.
In a Monday analysis, market observer Rekt Capital said noted That Sunday’s decline saw BTC close below the key 21-Week Exponential Moving Average (EMA), around $78,000, after successfully retesting this level as support for several consecutive weeks.
The analyst explained that this performance “demonstrates how weak purchasing power was at the 21-week EMA support, producing a limited rally even after multiple successful retests.” It also means that the price is positioned for a bearish retest of this level, with any future near-term rebound potentially turning the EMA into resistance.
He emphasized that a recovery is likely as Bitcoin has now formed a new weekly CME gap around that area. Therefore, the potential relief rally would turn the 21-week EMA into new resistance and also serve the newly formed CME gap.
“It would turn the old CME Gap area into new resistance; after all, the previous CME Gap served as a Range that is technically lost given the Weekly Close below the old CME Gap bottom,” the market observer added.
Rekt Capital emphasized that this week is crucial for reversing bearish sentiment, with Bitcoin needing to close above the EMA and at least within the CME Gaps to regain its bullish momentum.
BTC faces the pattern of ‘cascading dumping’
Meanwhile, analyst Easy On Chain confirmed that Bitcoin’s sell-off may not be over yet as it faces not a simple short-term correction, but a “structurally driven crisis, fueled by cascading debt liquidations and deep fear in the spot market.”
Based on data from CryptoQuant, he highlighted a “clear cascade dumping” pattern in which capitulation by long-term Bitcoin holders causes panic selling among short-term investors.
The data shows that long-term holders who purchased 6 to 12 months ago have an average realized entry of about $110,851, meaning many have entered deep unrealized losses after the recent collapse.
Since Thursday, on-chain flows have shown heavy inflows of currency from these holders, with the Spent Output Age Bands (SOAB) ratio for 6- to 12-month coins rising to 10.54%, far from the normal level of 1%. Historically, this has led to large-scale capitulation, increasing selling pressure in the spot market, which has ultimately spread to short-term investors.
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Moreover, ultra-short-term stocks, which represent roughly 80% of currency inflows, are currently being dumped at a loss below the critical breakeven point (1.0), suggesting that most short-term inflows are not profit-making, but loss-making, driven by fear.
“The current decline is therefore an internally driven market crisis, caused by liquidations of derivatives, large-scale capitulation of long-term holders and increasing panic among short-term participants,” he concluded. He affirmed that “until this toxic supply is fully absorbed and sentiment stabilizes, a quick V-shaped recovery remains unlikely,” and investors should avoid aggressive dip buying.
Featured image from Unsplash.com, chart from TradingView.com