Jun 27, 2022
Bruised Bitcoin Due Relief After Crypto Wipeout, Charts Show
The wipeout in Bitcoin may have run its course, a range of technical indicators suggest.
Momentum measures and insights from options bets signal ebbing selling pressure and a possible trading range of $20,000 to $25,000 -- though the usual caveats apply about the mercurial nature of cryptocurrencies.
The largest digital token has slumped about 70% from a November record and was little changed at $21,343 as of 8:38 a.m. Monday in London. It slid below $18,000 earlier this month before retaking the closely watched $20,000 level.
Tightening monetary policy, withering speculative ardor and collapsing digital-asset projects have spurred a broad crypto rout in 2022. But the mood in global markets is turning less dour on tentative hopes that the price pressures driving interest-rate hikes may be cresting.
Read more: Miner Capitulation Means Bitcoin Bottom Is Near: CryptoQuant
The lessons of Bitcoin’s past swoons suggest it’s in the vicinity of its bear-market low, according to Glassnode. This “bear market is now firmly within historical norms and magnitude,” the blockchain analytics firm wrote in a note.
A widely followed DeMark technical indicator known as TD Sequential suggests much of the Bitcoin selloff is behind us. The study uses a method of counting applied to chart patterns to try to anticipate when a market trend has run its course. Bitcoin has printed the maximum 13 downside count, which proponents of the study would argue presages a reversal. DeMark studies in the past have identified shifts in Bitcoin’s prevailing trend.
Another popular charting method is the so-called linear regression channel. This technique seeks to identify statistically unusual deviations from a line that best fits a series of Bitcoin prices. In the analysis here, Bitcoin plunged to three standard deviations below an upward sloping regression line starting at December 2018 lows -- that’s statistically relatively rare and some analysts would argue the selloff has therefore reached a nadir.
A momentum indicator known as the relative strength index suggests Bitcoin’s selloff is due a pause. The index on a weekly basis has fallen into the “oversold” region below 30 and is around the lowest levels in data compiled by Bloomberg going back to 2010. The last time the gauge flashed “oversold” in 2018, the token went onto stage a strong rally.
Options contracts provide hints about Bitcoin’s next trading range. Significant numbers of outstanding contracts expiring end-September are at strikes of $25,000 and $20,000, data from crypto derivatives platform Deribit show. There are roughly 9,000 outstanding contracts at each of those levels. On one view, this relatively elevated so-called open interest at $25,000 and $20,000 suggests traders see the former as a Bitcoin ceiling and the latter as a floor.
©2022 Bloomberg L.P.