Bitcoin Technicals Hint At Impending Pullback
At last, upward momentum for Bitcoin (BTC) has finally begun to slow. During this bout of non-action, analysts across the board have been doing their best to determine what’s next for the cryptocurrency market. And interestingly, many are coming to the conclusion that BTC, alongside its altcoin ilk, will soon fall, looking to technical factors to back their harrowing cries.
In a recent tweet, Nunya Bizniz, an astute trader and analyst, noted that Bitcoin’s three-day Relative Strength Index (RSI) reading has been a relatively good way to gauge trends, especially when to purchase or sell Bitcoin. He notes that throughout the digital currency’s history as a tradable, liquid asset, buying when the RSI is around 30 has turned out well most of the time, as such levels were only seen to precede bull runs.
Bizniz adds that historically, it has been best to sell when the RSI breached 88. The four last times this indicator breached that level, meaning the asset was well oversold, parabolic drawdowns were seen. In the most recent case, Bitcoin fell from $20,000 to $3,150, a collapse that many investors now cringe at. With the RSI reading now moving above 88, Bizniz suggests that another dramatic decline could be seen.
What’s more, Bizniz notes that Bitcoin’s chart from the market bottom in December to now is now almost essentially identical to that seen in 2015, which was something that was postulated over recent weeks. The analyst notes that while a bull run is most likely on, there may be a correction of around 40%, which would place BTC back in the $4,000s or $5,000s.
Some have been a bit less cynical in their predictions. Josh Rager of Level recently noted that if history repeats, a strong pullback of “at least 30%” from a previous accumulation and uptrend will soon be seen. This is because even during Bitcoin’s 2017 boom, common 30% drawdowns were seen, like when the asset shed thousands in a single week due to the now-infamous “China FUD”.
A 30% move from here would bring BTC to the $5,000 range.
Why Moving Higher From Here Isn’t Impossible
The thing is, market dynamics are very different now than 2013, 2015, or even 2017 or 2018. As Dan Held, the co-founder of Interchange, recently pointed out, the ecosystem’s fundamentals and infrastructure are much stronger now than in 2017 or 2018, sans mining costs.
Case in point, the industry has some of the biggest names in finance and technology delving in. Square, through its Cash App and chief executive Jack Dorsey; Fidelity Investments; E*Trade, Bakkt, and ErisX are among the developments in the space that make this rally entirely different than anything before it. Thus, some deem it logical that warnings of a large market correction can be deemed moot.
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