Bitcoin Might Have Already Reached Its 2020 Bottom

Well-known trader @TheCryptoCactus tweeted a Bitcoin price chart, outlining the recent price breakout and the creation of bullish engulfing daily candlestick. In addition, he stated that while he can see a pullback towards $8200, he believes that the bottom is in.

$BTC Update

Scenario played out faster than expected, price broke above $8000 and even printed a strong daily close which is really verifying my opinion that the bottom was in at $6800…

Could see a pullback to $8200 level but overall I'm very bullish on the entire market. pic.twitter.com/PORFham5a9

— Cactus (@TheCryptoCactus) January 15, 2020

Let’s take a closer look at the Bitcoin price and attempt to determine its future price movement.

Long-Term Bitcoin Bottom

The weekly chart suggests that the price has reached a bottom, thus agreeing with the tweet. This verdict comes from several reasons: Firstly, the area at $7500 acted as support throughout the entire upward move from May to November 2019, when the price broke down. Once it did, it failed to sustain the lower price levels and created two long lower wicks. Afterward, the price reclaimed the support area at the beginning of 2020. Secondly, the 50- and 100-week moving averages (MA) had previously made a bullish cross. While the breakdown caused the price to decrease below them, the recent price increase has reclaimed them as support. Finally, the price is trading inside a descending channel, in place since the price reached a high on June 24, 2019. Currently, it is trading right at this resistance line. A breakout above it would act as the final confirmation that the price has made a bottom and Bitcoin is now in a bullish trend.

Ascending Wedge

However, the movement since December 19, 2019, suggests that the price might have reached a short-term top. The price has created an ascending wedge, which is considered a bearish reversal pattern. Furthermore, the RSI has been generating bearish divergence since the end of the third wave, which was at the $8400 top. The price has currently reached the confluence of both the resistance line of the wedge and the long-term descending channel, solidifying the strong resistance above the current price. A breakdown from this pattern could take the price to $7800. While the previous price movement and technical indicators are dissimilar, the price created a similar ascending wedge throughout February/March 2018. Once the price reached the convergence of the resistance from the wedge and the long-term resistance line, the price broke down.

Candlestick Analysis

In the early hours of January 15, the Bitcoin price created a bearish candlestick with a small body and a long upper wick. This indicated that there is resistance near $8860. Afterward, the price decreased all the way to $8600 before making another attempt at breaking out. However, the second rally also ended at the same level, failing to reach a close above the previous high. This created a double top. While the second candlestick did not have an upper wick, the failure to close above the previous high is a bearish development, further solidified by the decreasing volume and bearish divergence in lower time-frames. Combining this with our previous analysis, we can assume that BTC will decrease at least to the support line of the ascending wedge near $8400 and possibly break down towards $7800. To conclude, the price movement since the beginning of 2019 suggests that the Bitcoin price has reached a bottom and will increase throughout the year. However, the short-term movement indicates that a correction is due before the price begins another upward move. A breakout above the resistance line of the descending channel would confirm that the bottom is in.