Today I’m going to try and answer the question everyone keeps asking me: Is this the bottom?
Bitcoin has bounced nicely off the 50 week moving average (blue dotted here) and is playing pinball between that and the 50 day moving average just above (blue), which it’s just rejected overnight.
The volume on this bounce was notable, albeit almost all occurring in a single hour. A classic short squeeze.
Given the volume and the fact that this occurred at the prior Feb lows and at a major moving average, there would be a great case for this being the bottom if we didn’t have a death cross in place (blue moving average crossing through red), and weren’t underneath the 200 day moving average (red).
However, with those in place any bounce should be looked at with a skeptical eye. My feeling is that we’re unlikely to have seen the bottom proper.
The setup we’re seeing is uncannily similar to the 2014 correction, so let’s turn back the clock for a moment.
In April 2014 at point 1 we had just had a death cross followed shortly after by a bounce off the 50 week moving average, and then a rejection of the 50 day moving average from below i.e. the exact same chain of events we’ve just seen. The marked $550 point is exactly where we are now, should history rhyme.
Bitcoin then scraped down the 50 day moving average (blue) until it managed to break through it and test the 200 day moving average (point 2) from below.
Bulls then made a protracted attempt to break through the 200 day moving average, however bears eventually won out and a protracted bear market ensued, bottoming out in a spike down to $161 in January 2015. The spike on the far right of the chart (Oct-Nov 2015) marked the resumption of the bull market.
Were history to exactly repeat we’d be looking at a bear market until lows of $2400 in January 2019, and then a resumption of the uptrend in Oct-Nov 2019.
However, I feel the chances of it being a carbon copy are slim, given the clear institutional interest, my suspicion is that a protracted bear market is unlikely and that we’ll break above the 200 day more quickly. However, the key take-away remains:
We will not be back in a bull market until we get safely back above the 200 day moving average, preferably retesting it from above.
So, if the bear market is likely to be shorter, the question is: how short? Let’s zoom out.
Here’s our super long term log uptrend channel on BTC. Comparing our current distance from that channel with the situation in 2014, it’s clear that we are much, much closer to the channel this time. Drawing a line across the tops gives us a channel re-entry ETA of early June, and a potential bottoming by late July.
Ethereum broke through its 50 week moving average last week. The death cross has been confirmed now (blue 50 over red 200 day moving averages), so my feeling is lower lows lie ahead until BTC hits its channel. Next targets to the downside would be the 50 week just below and then support levels at $350/$301.
Another death cross, and a nice neat rejection of the 50 day moving average. My feeling is we’re looking at a revisit of the 0.54 support level, and if, as I suspect, that fails a swift drop to 0.299.
Litecoin continues to outperform everything else, still nicely holding support at $109. Note that the RSI (first oscillator under the chart) is testing the 50 bull/bear level from below, so clearly at a pivot point. Next support under $109 would be the 50 week just below, followed by $93. Once again LTC is man of the match technically.
BCB Group has no position or opinion on the price of Bitcoin or any other cryptocurrency and this article should not be construed as analysis of or advice regarding the current or future market price of Bitcoin or any other cryptocurrency. No analysis of the price movements of BTC or any other cryptocurrency or any other asset provided by BCB Group should be construed as an invitation or inducement to buy, sell or otherwise to trade BTC or any other cryptocurrency.
Jon is MD of British music production company Poseidon. He began studying technical analysis in 2000 for use in managing his own investments and due to its overlap with behavioural economics – much used in Poseidon’s international marketing work. This has seen the company achieve three iTunes US number one albums in as many years among other notable successes.
A Bitcoin investor since 2013, Jon and has been providing Technical Analysis (TA) commentary for a private community of Cryptocurrency investors since mid 2017.