At the start of the new trading week yesterday, it looked like the price of Bitcoin could finally establish itself above $ 30,000 and maybe even start a major trend reversal. BTC / USD climbed as high as $ 31,750, repeating a key resistance level when the main currency was rejected in late May. This time, too, the bears showed strength and immediately stopped the small uptrend. Within a few hours, the price of Bitcoin fell below $ 30,000 again and only support was found again at a good $ 29,000.
The current situation is not just easy for bitcoin bulls. The price has been moving in the corridor between $ 32,000 and $ 28,000 for a month without making a clear directional decision. But there may soon be a massive price movement in one direction or another.
Bollinger Bands: Explosive price action in sight?
Such a scenario is supported by a technical analysis indicator found on the Bitcoin chart. The so – called Bollinger bands are based on arithmetic calculation, moving average price over the last 20 days. When the upper and lower bands come together and thus approach the average, this is often a sign that impulsive price action is imminent.
Exactly this event can be spotted right now in the Bitcoin chart. And history shows that this indicator is often a good forecasting tool that the sideways movement is coming to an end. October 2020 was the last time the Bollinger Bands’ current close proximity decreased. As a reminder: Bitcoin’s huge bull run continued shortly thereafter, raising the price from $ 10,000 to well over $ 60,000 in a few months.
Also in the summer of 2021, chart analysis shows that the Bollinger bands fell sharply before the bull run began from about $ 30,000 to nearly $ 70,000 shortly thereafter. However, the indicator is just saying that a strong breakout could be imminent – but it does not have to be upside down.
Such examples can also be found in the history of BTC. In November 2018, for example, the price of Bitcoin fell after a long sideline move as the Bollinger bands approached and fell from $ 6,500 to just over 3,000. Sharp correction of more than 50 percent in a short time.
Bitcoin Traders: Make Profits Volatile
The Bollinger Bands do not necessarily act as a signal to buy or sell Bitcoin now. No one can use this instrument to reliably predict that the price will soon rise 100 percent or fall 50 percent. But investors should take it as an opportunity to look closely at the market so that they can make appropriate trading decisions.
The indicator can also be useful for traders on crypto exchanges. Because if there is strong market volatility, experienced traders can achieve high profits. And that with both prices rising to a long position and prices falling to a short position. By trading with leverage, these changes can be compounded over and over again, which of course carries risks.
RSI: the indicator enters the oversold region
Another very important technical indicator can give Bitcoin bulls current hope. We are talking about the Relative Strength Index (RSI). This indicator calculates and compares the moving average of price movements up and down. The calculated value moves on a scale between 0 and 100.
A technical analysis rule of thumb states that an asset is considered “overpriced” when its RSI is above 70 and “oversold” when it is below 30. However, some analysts also distinguish between bull and bear markets. Thus, in a bull market, an asset would only be “over-bought” at 80 per cent and “oversold” at 40 per cent. Conversely, in a bear market, RSI is estimated to be above 60 “oversold” and only below 20 “oversold”.
The RSI of Bitcoin on the weekly chart is currently at a value of about 34. If you use the general rule, BTC is already very close to the oversold region. On the other hand, assuming we are in a bear market that could pull ahead for months, Bitcoin still has some room to fall on the RSI.
Reverse trend reversal?
A look at the history of BTC is also helpful here. The price of Bitcoin RSI reached lower than it was last time in March 2020. At that time the markets fell sharply after the coronary pandemic and the price of Bitcoin fell deep into the $ 3,000 range. The last time the RSI was low in Bitcoin history was in December 2018, when Bitcoin fell to a year-end low of just over $ 3,000 after the previous bull run.
The RSI indicator can really offer some hope that the bottom may be in the near future. Because each time the RSI fell into the lower 30s in recent years, a strong upward movement for the Bitcoin price followed. Therefore, this indicator can really be considered as a very important chart signal that investors should definitely be watching for.
However, in order to create a bullish trend reversal, BTC / USD must meet some requirements. The price should not, under any circumstances, fall below the annual minimum of $ 26,700 on May 9, 2022 in the short term. Because if that incident does occur, the likelihood of an even more significant correction in the lower $ 20,000s increases. In the next step, Bitcoin would have to break the resistance around $ 32,000 to be able to test higher levels later.
EMA ribbons at $ 40,000 key resistance
EMA ribbons are also an important technical indicator for the reversal of potential trends. As long as Bitcoin fails to break the ribbons on the upside of the weekly chart, the bearish market situation will remain on the larger time frames. However, the EMA ribbons are currently between $ 36,000 and $ 40,000, so there is still a long way to go for Bitcoin before a bullish trend can be talked about.
However, analysts are still bullish on the Bitcoin price. Wallet Investor expects Bitcoin to reach $ 50,000 levels again in the next 12 months. That would be an increase of more than 60 per cent from the current rate. And in the next 5 years, Wallet Investor even considers the $ 100,000 per Bitcoin mark achievable.