Having entered quite oversold territory, Bitcoin is starting to turn back around after threatening to take out the $60,000 local low. Can the $BTC price finally catch a bid and avoid a deeper leg down into the depths of the bear market, or is this nothing but a short respite for the bulls?
A descending channel pattern
Source: TradingView
The short-term time frame reveals that the $BTC price is traversing slightly downwards in a descending channel pattern. While this pattern can lead the price down, when it breaks it is more likely to do so to the upside. This could mean that the bulls could possibly have a crack at the $69,000 major resistance level.
If this were to break and a confirmation was made above, perhaps the recent price action was actually the bottom? Obviously, it is far too early to call, and even getting out of this channel to the upside is not a given. Market sentiment is still awful, and the current 52% correction is very shallow for a bear market compared with previous ones. Most are expecting the price to drop further, so with all this in mind wouldn’t this be a great place for the market to catch everyone off guard and stage a decent upside rally?
Price bouncing after RSI 6-year low
Source: TradingView
The current channel pattern is going in the wrong direction as far as the bears are concerned. The big bear flag above is a textbook pattern. It inclines slightly to the upside. It is a holding pattern until the next leg down.
This channel is descending, and so it is going in the opposite direction. Therefore, as mentioned previously, there is more chance that the price will break out of the top than the bottom. The lowest touch of the bottom of the channel could also be seen as making a double bottom - more reason for a bounce.
Another bullish signal can be seen in the form of the Relative Strength Index (RSI). When the $BTC price fell to the $60,000 low, the indicator line in the RSI fell to 15.80. A reading this low has not been seen for 6 years, when the Covid crash resulted in this indicator coming down to the exact same level. Back then, following this crash, the rally which took the price up to the first of the double tops resulted in a more than 1,400% gain.
Bottom is here - or coming soon
Source: TradingView
When looking for potential bottoms, one factor can often be the very long tail of a weekly candle. The very long tail that shot down to $60,000 reveals that buyers stepped in and bought heavily, not allowing the price to settle for more than an instant at this level. This tail measures at a length of more than $10,000.
The next bottoming tail that has anything like a similar length is the one that fell through the bottom of the 8-month bull flag of 2024. That said, there is one other very long tail, but it didn’t mark the bottom, and that was in the middle of the first big falling wedge pattern.
This monster measured a length of $16,000. It could also be argued that this particular hammer candle did in fact augur the coming W bottom pattern that lifted the $BTC price out of that wedge and eventually up to the all-time high.
Finally, while not wishing to get ahead of oneself and declaring a bottom before time, the Relative Strength Index (RSI) in this weekly time frame is showing that the indicator line has reached a depth which is very close to the lowest level recorded in the 2022 bear market, which also happens to be the lowest point at any time in the history of Bitcoin up to now.
To set the record straight, there is always the possibility of one more leg down in order to grind the bulls into the dust and achieve that absolute last capitulation that bear market bottoms demand.
That said, will there be a bounce from there? There may be a v-shaped recovery, or there may be a few weeks or months of bottom grind, but that bottom is either here or it's coming soon - at least that’s what the above chart is suggesting.
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.