It’s not quite time to buy Bitcoin. The King of Cryptocurrencies has farther to fall.
We turned bearish on Bitcoin back in April when we first noticed its seasonal tendency to fall during the summer months. We reiterated that bearish stance two weeks ago just as its various moving averages morphed into a bearish configuration.
Last week, Bitcoin broke down. It lost the support of the $60,000 level and traded all the way down to $54,000 before buyers stepped up to rally Bitcoin back to $57,000 yesterday.
While buying Bitcoin here at $57,000 is more favorable than buying it at $70,000, it seems to me like it’s still too early. The King of Cryptos is certainly oversold enough that it could bounce from here.
Maybe it could pop back up towards the $60,000 level that was previous support and is now resistance. But Bitcoin isn’t set up to start a strong, new, intermediate rally phase. It still has work to do on the downside.
Could Bitcoin Bounce Back?
Take a look at this updated chart…
Bitcoin has been on a one-way path lower for most of the past month. The momentum indicators at the bottom of the chart have been moving lower right along with it. This tells us the downtrend is strong and intact.
The Relative Strength Index (RSI) does show some slight positive divergence – meaning it is holding above its previous low while Bitcoin made a lower low. But that divergence could be negated if Bitcoin continues lower. And, since the MACD and CCI indicators do NOT have positive divergence, the odds favor more downside.
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Bitcoin is oversold enough in the short-term to justify a brief bounce attempt over the next few days. Perhaps a rally back up to the breakdown level ($60,000) is in the cards.
Bulls should hope that rally is strong enough to pull the momentum indicators far enough off their lows that they’ll make higher lows during Bitcoin’s next decline. That action would create positive divergence on the momentum indicators. And that will set the stage for a significant, intermediate-term rally phase.
At the moment, though, the best the bulls can hope for from here is a short-term bounce.
Best regards and good trading,
Jeff Clark
Editor, Market Minute