As the bitcoin price continues to fall, it is demoralizing for bulls. According to historical indicators, there could be a bottom, as the indicator reached historic lows that were not experienced since 2015.
Following the previous signal was 10,000% returns, and Bitcoin forever became a household word. While such returns aren’t likely a second time, such oversold conditions could yield some significant, unexpected upside. This is a close look at 3-day Stochastic price charts for BTCUSD.
Explained: The Stochastic Oscillator
George Lane created the Stochastic oscillator, a range-bound momentum indicator. This indicator uses support and resistance levels. According to Wikipedia, “The term stochastic refers to the point of a current price in relation to its price range over a period of time. This method attempts to predict price turning points by comparing the closing price of a security to its price range.”
Bitcoin Perfectly Follows Market Cycle Comparison, What Comes Next For Crypto?| Bitcoin Perfectly Follows Market Cycle Comparison, What Comes Next For Crypto?
The formula provides an asset’s price expressed as a percentage of its price range between 0% and 100%. The goal of the Stochastic – often called Stoch for short – is to spot when prices close near the extremes of a recent range. This is where the most likely to be reversed. A simple rule of thumb is that the higher the reading, it means the market is more oversold. This makes it more likely for a bounce to occur. Overbought conditions will result in a higher likelihood of rejection.
BTCUSD had a 10,000%+ return on investment after the low| Source: BTCUSD on TradingView.com
Bitcoin bulls try to put in a bottom
The current Bitcoin price is the lowest in 3 day timeframes. Only the 2015 bear markets bottom was the last time that Bitcoin prices were this low. The price rose by 10,000% in the subsequent months. A second bottom followed. At just $200, Bitcoin was the lowest-priced cryptocurrency. It soared up to $20,000. Crypto was put on the map forever after – what happens this time?
For now, bulls aren’t out of the woods. The Stochastic oscillator consists of a fast stochastic (%K) and a slow stochastic (%D). These two lines are interpreted as a sign to move. While bulls attempt to establish a bottom, bears will defend the 3-day bull cross.
The bullish crossover is not yet complete | Source: BTCUSD on TradingView.com
Stochastic and RSI both can be used for signalling overbought/oversold conditions. Both tools measure price velocity. Stoch measures the percentage of a trading area formula. According to Investopedia, Stochastic is more effective for a sideways market – exactly what crypto traders are painfully experiencing now.
Time Vs Price: Why This Bitcoin Correction Was The Most Painful Yet| Time Vs Price: Why This Bitcoin Correction Was The Most Painful Yet
The Stoch may generate false signals in volatile situations. It is difficult to overlook a Bitcoin signal that has been historically high-sold, especially when previous signals were so profitable. This signal will produce what?
This reading is the 2nd-lowest 3-day stochastic ever recorded in all of history. #Bitcoin. You might find the bottom, people. pic.twitter.com/84UhmWxtNl
— Tony “The Bull” Spilotro (@tonyspilotroBTC) May 3, 2022
Follow @TonySpilotroBTC on Twitter or join Telegram from TonyTradesBTCGet daily market insight and expert technical analysis education. Please note: Content is educational and should not be considered investment advice.
Featured Image from iStockPhoto. Charts from TradingView.com
