Bitrabo Editorial
The cryptocurrency market continues to experience declines. In the past week, Bitcoin has seen a bearish candle of over 3% and has reached a long-term support level around $25,100.
This support level is crucial for maintaining the uptrend that has been in place for the past 6 months. If Bitcoin can utilize this support and break out of the descending parallel channel, there is potential for the uptrend to continue.
Bitcoin Facing Challenges in Maintaining Uptrend
Yesterday, Bitcoin dropped by over 3% and closed at an important support level of $25,100 (green area). This level aligns with the 0.382 Fibonacci level, which measures the entire upward move since January 2023. In a strong uptrend or downtrend, this Fibonacci level often acts as a common target for healthy corrections.
However, the current price action continues to decline and BTC is losing this support level. If today’s movement does not turn out to be a temporary deviation, it could indicate the end of the uptrend that has been in place since early 2023, rather than a correction.
On the other hand, if Bitcoin is able to quickly reclaim the $25,100 level, it would be a bullish signal, indicating that the uptrend is still intact. In that case, a bounce towards the $27,400 area becomes possible. This level represents both the 0.236 Fibonacci retracement level and the upper edge of the descending parallel channel, where the BTC price has been trading since mid-April.
Furthermore, the recent decline has resulted in the loss of the median of the channel (blue dashed line). In this situation, the lower edge of the channel becomes the natural target, currently descending around $23,700. This level aligns strongly with the 0.5 Fibonacci retracement level and the 200-day moving average (200D MA, blue line).
If this support level is breached, the next important support is situated at $21,450. This level represents the 0.618 Fibonacci retracement level and is an important horizontal resistance/support area.
Trading Volume Indicates the End of Compression Phase
It is worth noting that Bitcoin’s trading volume has been steadily decreasing since November 2022, particularly following the crash of the FTX exchange. Decreasing volume indicates reduced volatility for the asset and signifies a period of extended compression.
During such a phase, trading volume typically sees a sharp increase and the market experiences a strong move either upwards or downwards. The current pattern appears to be mature and primed for movement in the coming weeks (blue circle).
Long-Term RSI Could Provide Support
The daily technical indicators are currently giving bearish signals, with the Relative Strength Index (RSI) dropping below 50.
Traders often use the RSI as a momentum indicator to determine whether an asset is overbought or oversold. They make decisions about accumulating or selling assets based on this metric. When the RSI reading exceeds 50 in an upward trend, the bulls have the advantage. Conversely, a reading below 50 suggests the opposite.
However, the long-term RSI chart indicates an ascending support line dating back to June 2022 (black line). The last 3 instances where the RSI touched this line (blue circles) marked lows in the Bitcoin market (blue arrows) and served as buying signals.
Currently, the line is just above the oversold territory, near 30. The RSI would need to decrease by another 5 points to reach this level. Therefore, while the BTC price still has potential for downside, the support on the RSI chart could initiate a bounce and a resumption of the uptrend.
The Moving Average Convergence Divergence (MACD) has also been declining since mid-April. The indicator’s histogram is generating increasingly long red candles, confirming the downward trend (orange circle). A potential bounce could be indicated if a shorter, pale red MACD bar appears.
BTC Price Prediction: Will Bullish Divergence Lead to a Bounce?
The short-term 4-hour chart provides a slightly more bullish BTC price prediction. Bitcoin has consistently shown a descending parallel channel pattern, which is typically a bullish signal that often leads to an upward breakout.
However, for this breakout to occur, the BTC price must reclaim the channel median at $25,450 and the horizontal support area S1. Only then will there be a possibility of attempting to regain the weekly pivot (P) at $26,200, eventually leading to a potential move to the upper edge of the channel.
Additionally, there is a developing bullish divergence (green) on the 4-hour RSI. Although the BTC price has recorded a lower low, the RSI chart is forming a yet unconfirmed higher low. If this divergence is confirmed, it would signal the possibility of recovering lost support levels.
Furthermore, the MACD appears to be attempting to reverse the short-term trend. The histogram has generated the first pale red bar and is trying to turn back upward.
However, if these attempts fail, the nearest support area remains at the S3 level, around $24,000, which aligns with the lower edge of the descending parallel channel.
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Disclaimer
In accordance with the Trust Project guidelines, this price analysis article is for informational purposes only and should not be considered financial or investment advice. Bitrabo is dedicated to providing accurate and unbiased reporting, but market conditions are subject to change without notice. Always conduct your own research and consult with a professional before making any financial decisions.