Bitcoin (BTC) Holds Major Trendline: Bottom Formation Still in Play
Bitcoin (BTC) plunged back down to $84,000 on Monday, reigniting fears that the next downward leg of a bear market was about to take place. However, the $84,000 horizontal support, together with the major ascending trendline kept the price from falling any further. Is a potential bottom still forming?
Did the macro narrative drive the $BTC price?
According to the mainstream press or to social media the Sunday into Monday Bitcoin dip was caused by the yen carry trade unwind, weakening Chinese data and a tightening of its crackdown on crypto.
However, from a technical analysis perspective, the $BTC price was very overbought in the short time frame, and a reversal impulse needed to happen. It may have been the case though that market makers used the macro fear stories to bring the price down heavily and wipe out leveraged longs to the tune of $833 million.
Double bottom?
Source: TradingView
According to the short-term $BTC chart on Tuesday, it looks like the panic has been averted. It can be seen that the price did drop around $7,500 from the rejection of a combination of 2 descending trendlines and a horizontal resistance level. Such a rejection was far more likely to be from these price barriers, rather than anything to do with Japan or China.
The $BTC price is currently just above the $86,800 support level, although there is the possibility that it could come back down the small distance to retest the major ascending trendline before heading back up, potentially in more of a purposeful fashion.
Besides resetting most of the shorter term momentum indicators, it could be said that a double bottom pattern has now occurred. These are bullish factors, and now it remains for the price to push through the down trend line (faint dotted line) and to make a higher high above $93,000. A change in the trend could then begin.
W bottoming pattern taking shape
Source: TradingView
It’s speculation at this point, but in the daily time frame it can be observed that potentially the first part of a W pattern is taking shape. This is quite a tilted W, so if the price breaks through the fainter down trend line, this could be considered the neckline. Or, the W could also be taken with the longer descending trendline as the neckline.
Either way, this pattern is often associated with a double bottom, and could be the signal that a rally back to the upside is about to happen.
Yearly occurrence about to signal next big rally
Source: TradingView
The 2-week chart above has the measurements of all the Stochastic RSI cross-ups from the bottoms to the tops. Seven years of data tell us that there have been seven such occurrences - so roughly one a year. This gives an idea of the scarcity of these events, and the power of the momentum that they signal.
Most of these crosses have eventually resulted in more than a 100% rise in price. If we took 100% as a possible target for this coming cross-up, this would take the price to around $170,000 - certainly worth staying in Bitcoin for.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
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