Bitcoin topped out in late 2021, along with the rest of the broader equity markets.
But unlike the S&P 500 and the Nasdaq – which have declined 14.6% and 22.3%, respectively, bitcoin has had a larger pullback of 52%.
Volatile swings in the cryptocurrency market are nothing unusual.
For example, bitcoin made a high in December 2017 at $19,891. A year later, the cryptocurrency was trading at $3,128… that’s an 84% selloff!
And since then, bitcoin has rallied an astonishing 2,105%.
For bitcoin investors, it truly does seem that there can’t be gains without some pains…
One key to successfully investing in cryptocurrency is understanding where the market is currently trading in the broader cycle.
My analysis tells me that the current bearish cycle may have already bottomed out and we’re now preparing for a run to new all-time highs.
Of course, timing market bottoms can be tricky to get right. That’s why I want the market to prove to me that it’s getting ready to change course.
Fortunately, now I’m seeing the initial signs that bitcoin is starting to do just that.
So first, let me walk you through a daily price chart of bitcoin shown below…
There are two important things going on with this price chart…
-
$44,538 is a resistance level that’s managed to put a lid on any rallies in bitcoin since the beginning of the year (horizontal red line).
The market has tried to test this level several times without being able to successfully break through.
But that changed last week, when crypto bulls were finally able to take prices through this key level.
It’s important to remember this age-old concept of technical analysis: broken support will serve as future resistance, and broken resistance will serve as future support.
That’s what’s going on with bitcoin now. I expect prices to pull back in the short term to test the broken resistance level of $44,538. Then, we’ll see if it’ll hold as a supportive floor for prices.
If bitcoin can stay above this level, then it makes sense to maintain a bullish stance in this market.
-
The second feature of this price chart is how bitcoin has currently managed to trade above its 20- and 50-period moving averages for several days in a row (blue and red squiggly lines).
On the left side of the chart, notice that once the selloff in bitcoin really picked up steam prices remained firmly below both of these moving averages.
I’d expect that behavior from a market once a strong trend is underway. The fact that bitcoin is now able to trade above those same moving averages is encouraging news for the cryptocurrency market.
|
Free Trading Resources Have you checked out Jeff’s free trading resources on his website? It contains a selection of special reports, training videos, and a full trading glossary to help kickstart your trading career – at zero cost to you. Just click here to check it out. |
These two pieces of technical evidence tell me that bitcoin may have already bottomed out… and the next bull run is already underway.
Next, we need to see if the market can hold that key level of $44,538.
That’ll be the first line of defense that bulls will be looking towards. The second is whether bitcoin can keep its head above the 20- and 50-period moving averages.
Right now, bitcoin is interesting because prices are still trading around 30% off its all-time high of $69,000.
That means there’s exciting potential upside ahead.
Happy Trading,
Imre Gams
Analyst, Market Minute
Reader Mailbag
What are your thoughts on cryptocurrencies? Do you think bitcoin will keep heading higher long term?
Let us know your thoughts – and any questions you have – at [email protected].