Bitcoin (BTC) has fallen to never seen before oversold levels on several weekly metrics. The short-term readings suggest that a bounce is expected.
BTC has been falling since reaching an all-time high of $68,958 in Nov. The downward movement so far led to a low of $17,605 on June 18.
An important development is that the price has reached a weekly close below its 200-week moving average (MA). While this has previously occurred in March 2020 (green circle), the price has never stayed below the MA for a considerable period of time.
Historically, BTC bounced at this MA before beginning a sharp upward movement. Therefore, touches of this MA have usually coincided with market bottoms. The MA is currently at $22,700 and could act as resistance.
Has BTC bottomed?
The daily RSI provides a more bullish outlook. Firstly, the RSI reached a low of 20, which is the lowest value since March 2020. So, this is in line with the relationship of the price to the 200-week MA, which suggests that a bottom is close or has been reached.
Secondly, from June 18 to 19, BTC created a bullish engulfing candlestick that had a long lower wick. When combined with the oversold RSI, it is a sign of a potential bottom.
The six-hour chart supports this possibility, since it shows a very pronounced bullish divergence. Also, since the RSI has moved above the high between the divergences (red icon), it has effectively created a failed swing bottom.
If the upward movement continues, the closest resistance would be at $23,000. This is the 0.382 Fib retracement resistance level and a horizontal resistance area.
Wave count analysis
There are several possibilities for the wave count.
The most bullish one suggests that BTC is nearing the bottom of wave four (white), of a five wave upward movement that began in March 2020.
A drop below the wave one high at $13,880 (red line) would invalidate this particular count.
The neutral count suggests that the price is still in wave four of the same five-wave upward movement. The difference between this and the bullish count is the top of wave three, which is later in the neutral count.
As a result of this difference, another downward movement would be expected prior to a significant bounce.
Similar to the previous count, a decrease below $13,888 would invalidate this count.
The bearish count indicates that the entire five-wave formation has already come to an end. In this possibility, the price has begun a new five-wave downward movement (red), which will take it between $10,500 and $14,500, the 0.5-0.618 Fib retracement support levels.
The irregularity in this BTC count is the massive difference in time and magnitude between waves two and four.
Unlike the long-term counts, the short-term ones are similar in each possibility.
The price is in wave five of a short-term five-wave downward movement (black). The sub-wave count is given in yellow, also indicating that the price is in sub-wave five.
The only potential difference is if there is another small drop prior to the bottom or if the bottom has already been reached.
For Be[in]Crypto’s previous bitcoin (BTC) analysis, click here
In line with the Trust Project guidelines, this price analysis article is for informational purposes only and should not be considered financial or investment advice. BeInCrypto is committed to accurate, unbiased reporting, but market conditions are subject to change without notice. Always conduct your own research and consult with a professional before making any financial decisions.