Today, Bitcoin price sank below $40,000 for the first time since September – a price more than 50% lower than what the market was anticipating this time of year.
While it is difficult to ignore the downside, the most recent sweep of lows suggests that there may be a hint of a trend line going back to the bear markets bottom. This could allow the bull market to remain intact for a while longer.
Technological Analysis and Framing the Importance of Trend Lines
In Bitcoin’s technical analysis, trends lines matter. These lines indicate that the market is ready to move in the opposite direction. If they break down, panic ensues.
In this example, the collapse of the horizontal support line at $6,000 in 2018 resulted immediately in a fall to $3,000. After that, the bear markets bottom was established.
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The initial Bitcoin bounce was what gave rise to hope and a new trend. This trend line does not follow price peak or valleys but is drawn from extreme oversold readings of the Relative Strength Index daily.
Long-term RSI trends could trigger a bounce. Source: TradingView.com.| Source: BTCUSD on TradingView.com
Bitcoin Bull Run RSI Trendline Must Be Holden
The Relative Strength Index tapped a long term trend line as Bitcoin prices fell below $40,000 daily on the BTCUSD daily charts. It has stood up to the black Thursday and 2021 bear market bottoms, dropping down to $28K.
Will this new move-down have enough momentum? Is it likely to continue? The reading alone on the RSI suggests conditions are highly oversold – the fourth most extreme since the bear market bottom.
Is it possible to win the fourth time?Source: BTCUSD at TradingView.com | Source: BTCUSD on TradingView.com
There were four touches to the daily RSI trendline during the bull market. The fourth touch was just before the top of the bull markets (green line).
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Once this trend line was breached in 2018, Bitcoin plunged sharply to $20K and below $6,000 within a month, which in turn led to the bear market (red dot line) in 2018.
Bitcoin has reached the trend line once more. The fourth tap will prepare the market to liftoff. Or, will it break down? For Bitcoin bulls, it could happen now or later.
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Featured Image from iStockPhoto. Charts from TradingView.com