Bitcoin Update: Bear Market Bottom Ahead

Bitcoin (BTC/USD), as well as most cryptos, are getting wrecked as we speak. Many are panic selling as the market is down by close to 50% in less than a month. On top of that, it seems that a fresh yearly low is printed with every passing minute. Bears look unstoppable as calls for Bitcoin’s death grow louder and louder.

Consequently, fear, anger, and despair grip market participants by the throat. Even some of the most hardcore hodlers and the biggest personalities in the space have capitulated. If you’re new in Bitcoin trading, it would be very easy for you to succumb under these conditions.

Do not. We are very close to the bottom and we will likely see a bounce that is so intense that almost everyone will be in utter disbelief. In this article, we show you why the Bitcoin bear market bottom may be ahead.

Drop to Heavy Demand Area

Over the last four weeks, bears have had their way in this market. Bulls are nowhere to be seen ever since Bitcoin breached $6,000 support on November 14, 2018. However, we are very confident that bulls will flip the table soon.

With the breach of $3,600 support yesterday, December 7, Bitcoin is once again falling like there’s no tomorrow. While the market looks extremely bearish, bulls are waiting on the other side of this plummet, specifically between $2,800 and $3,200. This range is the monthly support level. It used to be a heavy resistance area, but bulls breached it in August 2017 and retested it in September 2017.

Bitcoin 1M chart

Also in September 2017, the swing to a low of $3,000 was immediately rejected, hence the monthly hammer candle. This generated the parabolic run that saw Bitcoin reach its all-time high near $20,000. In other words, we can consider $2,800 and $3,200 as the parabolic support level. It is a high demand area where we can expect bulls to show up in great force.

Technical Indicators Signal Extreme Bearish Exhaustion

On top of the upcoming high demand area, technical indicators are showing signs of extreme exhaustion. The weekly and daily RSI are in oversold territory. They are likely to flash oversold readings once we venture into the $2,800 – $3,200 range.

Bitcoin weekly chart

In addition to oversold readings, we are also seeing a decline in volume, which signals seller exhaustion. Under these conditions, it is very likely that the market will bounce strongly once price reaches bull territory and buyers step in.

Formation of a Large Bull Pennant

If you look at the history of the market’s decline, you will see that the average retracement from all time highs (ATH) is 85%. At $3,000, Bitcoin is down by around 85% from its most recent all-time high.

BTC bubble bursts

Once Bitcoin hits our bottom target, we’ll be having the confluence of three events: drop to key demand, bear exhaustion, and reaching the average of ATH declines. We’ll have the fourth one if we consider the large bullish pennant on the three-day chart.

BTC/USD bull pennant

From a long-term perspective, this frightening bear market that we’re experiencing right now appears to be the corrective period of a larger market cycle. Thus if our expectation that we bottom out at $3,000 is correct, then to say that a promising 2019 is ahead of us would be a huge understatement.

Final Thoughts

A Bitcoin bottom does not equate to an immediate market reversal and instant bull run. While this can happen, it is very likely that we range sideways for months between $3,000 and $6,000 assuming that our read is correct. This offers us a lot of opportunities to accumulate Bitcoins before the bull market begins.

 

Featured image courtesy of Shutterstock.

Kiril is a CFA Charterholder and financial professional with 5+ years of experience in financial writing, analysis and product ownership. He has passed all three CFA exams on first attempt and has a bachelor's degree with a specialty in finance. Kiril’s current focus is on cryptocurrencies and funds, as he does his own crypto research and is a Product Manager at Mitre Media. He also has his personal website, InvestorAcademy.org where he teaches people about the basics of investing. His ultimate goal is to help people with limited knowledge of finance and investments to create investment portfolios easily, and in line with their unique circumstances.