Bitcoin Shows Reversal Signs Amid Growing Bearish Sentiment

The market has been bearish throughout November/December, especially since the Bitcoin price broke down below $7000. We may be close to seeing positive movement once more, since $10M worth of USDC have just been minted. Such high amounts of stablecoins being issued often leads to a price pump. This is not the only occurrence that suggests growth. The Bitcoin Energy Value model suggests that the current relationship between price and its Energy value is similar to that in periods prior to significant price increases. Technical analysis gives a similar outlook. Well-known analyst and trader @davthewave stated that the Bitcoin price has fallen to his long-term buy area, which he has outlined for more than a month.

Make it or break it time.

Right where I've wanted to see price for quite some time.

– 50% retracement of price
– Time of move up and correction near same
– 3 year MA support
– Deep in the buy zone
– plus formation of descending wedge pic.twitter.com/M3A7RrGkrM

— dave the wave (@davthewave) December 18, 2019

He noted that the Bitcoin price has retraced 50 percent in relation to its prior upward move, has found support at the three-year moving average, and has created a descending wedge. Let’s analyze these claims one by one and see what they mean for the future of the price.

Bitcoin’s Three-Year Moving Average

The Bitcoin price has just decreased to its three year moving average (MA). The same MA acted as resistance throughout the December 2018 bottom, before the price eventually broke out. Furthermore, the Bitcoin price is slightly above the long-term curved support line that outlines the logarithmic growth curve. This movement is very similar to that in December/January 2016. Back then, the Bitcoin price had just finished a long correction and made the first steps towards initiating an upward move. Also, it had just bounced on the three-year MA, which was slightly above the support line.

50% Retracement

The Bitcoin price has retraced to the 0.5 log Fib level when measuring from the December 2018 bottom. The 0.618 level is below the support line, making this a very likely place for a reversal. Also, the previous upward move, measuring from September 2016, ended right at this level. Thus, if the Bitcoin price does the same this time around, we should see a reversal soon.

Descending Wedge

Since the October 25 pump, the Bitcoin price has been trading inside a descending wedge. It is very close to the end of the wedge, having validated the support line several times. It is possible that the support line is slightly more downward sloping, since the presence of wicks makes it difficult to draw the correct slope. There is strong bullish divergence in both the RSI & MACD up to the daily time-frame, suggesting that a breakout will occur. This fits with the previous long-term analysis. To conclude, even though the Bitcoin price has been steadily decreasing for almost two months, the long-term charts suggest the price is very close to a bottom. A breakdown below $6000 would invalidate this prediction.