Bitcoin Has Hit its Localized 'Bottom': Shopping Time


7 min read
Bitcoin Has Hit its Localized 'Bottom': Shopping Time

Going to cut to the chase for this one, because there are a few factors I observed that made me pretty certain of Bitcoin's impending bullish trajectory.

Factor Number One: We're in a Bullish Market

This may sound obvious, but objectively speaking - you have to take this in the most literal sense possible (which few traders do).

What This Means

Since Bitcoin 'bottomed out' during its bear cycle (2017-2019), it has appreciated by >200%.

This may not seem like much, especially in comparison to the returns afforded by various 'Decentralized Finance' projects, but when you consider the sustained periods of price appreciation (in a vacuum), its hard to deny that the price is no longer trending bearishly (as it was throughout all of 2018 and the early parts of 2019).

What This Means: Part Two

Unless there is a reversal in trend that we did not previously anticipate, then there's no reason for us to assume that this consolidation period that Bitcoin is in, will not be followed by a continuation (of the trend).

Factor Number Two: Bitcoin's Technical Indicator Readings on the Weekly Look Super Fucking Healthy

Check out the RSI (Librehash RSI ; custom indicator) on the weekly resolution below:

Outlining What We See in the Chart Above

The RSI has exhibited healthy growth on the weekly resolution with a trajectory that appears destined for the 'overbought' zone at some point. Those that don't know what they're talking about will tell you that the RSI being in the 'overbought' zone is a sign of an impending reversal, but this is simply not true when we're in a BULLISH market (additionally, traders should recalibrate where they set their thresholds of declaring an asset as 'overbought' or 'oversold' per the RSI's reading). Overbought on the weekly resolution is very, very bullish. And the price movement required to push the RSI to that point is fairly significant. The math is intuitive here.

Without even panning the frame further back to capture price data reflecting periods from pre-2018, its hard to miss the fact that the RSI (on the weekly resolution) spent the entirety of 2018 without making it to that famed 'overbought' zone, versus the six trips that it took there in 2017 (let's take a look below in the next photo)

Take a look below:

In the chart above, we can see clearly that Bitcoin took six separate trips to the 'overbought' zone on the weekly resolution (RSI 14).

Conversely, in 2018 - no such trips (see below):

Yet, that all changed in 2019 (notably as Bitcoin's price action grew comparatively bullish):

Of course, we all know the story from that point - there was a major period of consolidation, resulting in a relatively 'flat', yet consistently expansive year for Bitcoin (and blockchain, in general).

As stated numerous times in the Discord + other platforms, price action can only be viewed in 'relative' terms (i.e., in comparison to some other point in the past).

So in this situation - when taking Bitcoin's age, available price data, and relative price action since the market 'bottom' that looks as though it will serve as the historical 'anchor' for that bear market (barring any additional 'black swan' events this year), its hard to argue that Bitcoin hasn't been extremely bullish since.

And if there's one thing that I learned, its to not 'fight the tide' when it comes to trading.

Factor Number Three: The 'Re-Test' Looks Obvious

Let's shrink our chart resolution down to the daily (from the weekly, which we were just on).

But before we can start extracting conclusions & analyses from the readings produced by our technical indicators of choice, let's start 'marking up' our chart.

Marking Points of Overhead Horizontal Resistnace / Underlying Horizontal Support

This part is pretty easy.

We all remember when Bitcoin's price was consolidating for what seemed like forever during the earlier part of the summer.

Do you remember where the price was stagnating at?

Spoiler: It was $11k.

So let's mark our first resistance / support (currently support at this very moment) right there [see below]:

Above is a glimpse of what my chart looks like after doing so.

For greater clarity I've added 'boxes' to show where the price interacted with this point as a strong resistance or strong support:

Remember, this is on the daily resolution, so I'm certain that if we were to 'minimize' resolutions down to a smaller time frame, then we would more than likely find additional instances where the price interacted with this horizontal 'battleground' flash point in a volatile manner over the past two+ years (which is what's depicted above).

Given the Persistent Impact of This (Now) Horizontal Support Over Such an Elongated Period of Time, There Should Be No Doubt in Our Mind That it Represents a Potent Support / Resistance

Without fail, Bitcoin has chosen $11k as a battleground whenever the price encounters this zone.

And the end result is that:

  1. Crosses above or below it usually take a substantial amount of bullish or bearish momentum behind it, and that direction of the price typically continues in the direction of the victor (bear / bull).
  2. Once this point is crossed, it serves as an extremely potent support point for the victors. Currently, the victors are the bulls (as the price broke north of $11k just a few weeks ago). Thus, this battleground will represent a point of angst for the bears if they wish to bust the price back down below $11k.

Of course - there's the most important point I've yet to mention and that's the fact that this is the first time that Bitcoin's price has returned to this point to 're-test' it as a support (after breaking past it when it was an overhead resistance).

Take a closer look below to see what I mean:

Following said break, there was a +13% appreciation in Bitcoin's price (against USD):

This may not seem much if you look at that stat in a vacuum, but when you consider the fact that this +13% appreciation in price came on the heels of the super surge in bullish momentum that was needed to push Bitcoin past its overhead resistance at $11k, this fact stands out as a more remarkable observation (and additional indicator of the market's clear raging bullish sentiment).

Peak of the Bullish Break Move For Bitcoin Was Impressive as Well

The fact that Bitcoin broke above not just one major overhead resistance, but two in the same move (without any in-between period of consolidation / "re-fueling" for the bulls), is definitely remarkable.

It also speaks volumes to the amount of bullish sentiment underpinning the Bitcoin markets currently (against fiat currencies, specifically; if we're measuring it against 'DeFi' / 'Ethereum', then that's another story).

Bitcoin Appears to Have Found a Temporary Home at the $11.3k Support Point

See below:

In case viewers are having trouble reading the annotation I included on that chart above, I've re-posted that note below:

"Seems that Bitcoin's price has found a home at another 'intermediate' support point ($11.3k vs. $11k).
This opens up the possibility for one more last-ditch push by bears to weedle the price down to $11k (as $11.3k is not as strong as a support) ; but I would be absolutely shocked if Bitcoin fell below $11k."

Conclusion: Shopping Trip

When looking at the potential upside here versus the realistic downside, an entry into a long position here feels super logical.

The next play for Bitcoin's price feels almost too obvious. However, that doesn't mean that this is a 'trap'. Oddly enough - the markets have a habit of going with the 'obvious' decision with such consistency, that traders can end up 'psyching' themselves out of entering potentially lucrative positions via skeptical self-talk that says:

"Come on, everybody sees this move a mile away, the whales must be planning some sort of unforeseen hidden maneuver that's going to screw all those 'longs' piled up on 'Mex."

Of course, this can happen (anything can), but I try not to fight the conclusions that the charts provide.

If it looks bullish, then its bullish for me - 'rationalization' is the enemy of effective trading on the open markets (quote by me, hang that up next to Buffet).

R/R Trade Idea

See below:

This is a rather conservative trade, but - hey, if we get stopped out (which is definitely possible with where I put the S/L on this idea) - then we can always just re-enter our position (or 'average down' the cost of our position / unit [Bitcoin]).

Either way - I feel confident that we'll be revisiting this chart in the near future to remark on how much the price appreciated after bouncing off of the support point that its currently sleeping on.

But hey - who knows! We'll see. #TimeTellsAll

GO TOP