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Bitcoin due for shallow technical rebound

Bitcoin is holding steady at the time of writing, keeping its head above the psychologically-important $20,000 mark.

This $20k region is also significant because the 2017 all-time high was set close to it (to be more precise, the 2017 ATH was at $19,511).

Still, Bitcoin prices remain supressed below its 200-week moving average.

Another major bout of risk-off activities across global financial markets could see Bitcoin bears racing towards the $12,000 - $14,000 region, which marked the 2019 peaks for the world’s oldest crypto.

Bitcoin due for shallow technical rebound

As we mentioned in last week’s report, we should see “more stable trading around the $20k handle”. That has certainly proven true over the past week.

Since then, several technical indicators such as the TD sequential and the linear regression channel suggest that Bitcoin’s selloff has run its course for the time being and could be due for a rebound.

Bitcoin’s 14-week relative strength index is also around its lowest levels on record, having broken below the 30 threshold which typically denotes ‘oversold’ conditions.

That could set a stage for a rebound on the weekly charts.

However, to be clear, any such rebound is expected to be shallow.

 

On the daily charts, Bitcoin had fallen into oversold conditions on four separate episodes so far this year, as marked by the yellow dashed vertical lines.

The subsequent recoveries were mostly muted, barring the 46% move northward from $35,000 in late January up to around $48,000 towards late March.

Bitcoin due for shallow technical rebound

 

Sentiment across the crypto world is clearly still sore and bruised from the violent selloffs which have caused its global market cap to shrink to around US$973 billion, according to CoinGecko.

That figure is a far cry from the US$3 trillion figure back in November, when Bitcoin posted its ATH (all-time high).

Cryptos and risk assets are bearing the brunt of the risk aversion in markets, as investors and traders contend with global monetary policy tightening in the face of supercharged inflation, which in turn is souring the global economic outlook.

Compounding matters are the bad news flowing out of the crypto sector, most lately with crypto hedge fund, Three Arrows Capital being issued a default notice.

Still, the fact that Bitcoin has been able to hold steady around $20k despite such negative headlines suggest that a lot of the bad news (at least the ones we know so far) have already been baked into prices.

If support holds at $20k, that may strengthen expectations for Bitcoin’s rebound in the immediate future, assuming macro conditions permit.

 

Bitcoin’s next rebound likely to be capped at $25k

Looking at data from Deribit on the options market, there are about 9,000 outstanding contracts (which expire at the end of September) congregated at the strike prices of $20k, $25k, and $30k mark – in yet another reminder of how important round numbers are in markets.

Those 9k contracts at each of those price levels are almost three times more than the outstanding contracts gathered at the $12k strike price.

In other words, a healthy pullback in Bitcoin could see the $25k region providing resistance, which may translate roughly into 20% upside from current levels.

That however assumes that prices can break above its 200-week moving average that now resides at $22,438 at the time of writing.

$30k appears to be a stretch too far, considering the strong headwinds that crypto markets are contending with at present.

 

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