Today, Bitcoin price sank below $40,000 for the first time since September – a price more than 50% lower than what the market was anticipating this time of year.
While the downside has been impossible to ignore, the latest sweep of lows has resulted in a touch of a trend line dating back to the bear market bottom that could keep the bull market intact a bit longer.
When it comes to technical analysis in Bitcoin, trend lines always matter. When such lines hold, it is a sign to the market that it is time to reverse. When they give way, the resulting breakdown and panic is usually dramatic.
For example, losing the horizontal support line of $6,000 in late 2018 immediately resulted in a plunge to $3,000. Once there, the bear market bottom was put in.
Related Reading | 2022: The Year The Secular Bitcoin Bull Run Could End
It was beginning at that initial bounce that restored hope in Bitcoin, that yet another trend line started. Rather than a trend line drawn across price peaks or troughs, this trend line is drawn across extreme oversold readings on the daily Relative Strength Index.
A long-term RSI trend line could cause a bounce | Source: BTCUSD on TradingView.com
As Bitcoin price swept below $40,000 on BTCUSD daily charts, the Relative Strength Index tapped a long-term trend line. The line itself has withstood the bear market bottom, Black Thursday, and the 2021 selloff down to $28K.
Does this latest move down have enough momentum to break through the support line? Or will it hold once again? The reading alone on the RSI suggests conditions are highly oversold – the fourth most extreme since the bear market bottom.
Fourth time is the charm? | Source: BTCUSD on TradingView.com
During the last bull market, there were four total touches of the daily RSI trend line. The fourth was the final touch before the peak of the bull market (green dotted line).
The same trend line, once breached, is what led to Bitcoin falling sharply from $20K to under $6,000 in less than one month in early 2018 and kicked off the bear market (red dotted line).
Bitcoin is once again at the trend line. Will the fourth tap prepare the market for liftoff, or will the line break down and a new bear phase begin? It could be now or never for Bitcoin bulls.
Follow @TonySpilotroBTC on Twitter or join the TonyTradesBTC Telegram for exclusive daily market insights and technical analysis education. Please note: Content is educational and should not be considered investment advice.
Featured image from iStockPhoto, Charts from TradingView.com
2018, Cryptoland Theme by Ninetheme