After plummeting from $46k to $43k on Sunday, Bitcoin managed to hold onto the critical support level of $46,000.
Breaking Down Bitcoin’s Price Action
Down 20% from its all-time high reached earlier this month, Bitcoin finds itself in correction territory – a sharp change from the almost uninterrupted year-long bull run.
With a relative strength index (RSI) of 45, Bitcoin looks to be oversold – a signal that it certainly has more upside potential in the short term.
The commodity channel index (CCI), another short-term valuation metric that can be used in conjunction with the RSI, points at Bitcoin emerging from the heavily oversold territory at $43k and moving at the start of a new uptrend.
BTC continues to touch the lower bound of its Bollinger Bands on the daily time period, a strong bullish signal indicating the asset is heavily oversold. However, the previous candle closed over the Bollinger band on the weekly timeframe – interpreted as a neutral or slightly bearish signal for Bitcoin.
Just below its weekly pivot point of $46.2K, Bitcoin potentially appears to be on the verge of a breakout, and investors should watch the price action of Bitcoin closely if it is able to recapture this price level. Another crucial pivot point to watch out for is $52K. If Bitcoin manages to breach this, another price surge would likely occur.
On a fundamental level, analysts and investors are concerned with a repeat of the 2018 major correction – but there is significant reason to believe this is relatively unlikely. Philip Swift, a cryptocurrency analyst, has pointed out that:
Spent Output Profit Ratio (SOPR) has now reset (green on the chart) meaning that wallets selling are now selling at a loss. This is a strong ‘buy the dip’ signal in a bull market. This alongside derivative fundings having reset is bullish.
Any asset pulling back from all-time highs are expected within a short time period in such a heated market – the 2017 rally was marked with pullbacks to price levels of %15-25 before breaking through the $20,000 barrier.
With the fundamentals of Bitcoin vastly improved in terms of mainstream adoption and institutional use, analysts are optimistic that this recent pullback will not last long. As the technical indicators on a weekly and daily basis point to it being oversold, now may be an essential time for traders to consider the considerable upside of the asset.
But high volatility in the market caused by political decisions such as in Nigeria and the Federal Reserve’s comments could lead to Bitcoin diverging with its technical indicators and dropping to even lower support levels.
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