Analysis: Is The End Of Bitcoin's Decline In Sight?

Zinger Key Points
  • As investors, we have absolutely no idea what could happen next, which is why we remain neutral and let price dictate. 
  • Jump in too early, and you leave yourself open to unfavorable results. 

Bitcoin BTC/USD confirmed a 16% drop in the price Monday, for a total decline of 67% since November 2021. 

In my update yesterday, which you can read here, I mentioned that yesterday's decline has the potential to start the end of this bear market and see the price reverse into a bull trend. 

I say potential, as of course there are no guarantees in investing, just probabilities. The price is now at a level which suggests we are highly likely to see a bull reversal based on past price action. 

Past price action does not guarantee future performance, but it is undoubtedly a marker, as patterns repeat themselves. Technical analysis has been used by the finest traders since the dawn of the financial markets and there is now enough price data for Bitcoin to apply technicals. 

The start of Tuesday saw a further decline in the price of 7%, but at the time of writing, the price had reversed back to its opening price of the day, forming an indecision candle known as a Doji on the daily time frame. 

Below is the daily time frame. 

What has caused this intraday reversal? The weekly 200 simple moving average (sma), a fundamental level of support I pinpointed in yesterday's update. 

Below is the weekly time frame. 

The weekly 200sma held firm as support in 2018 and 2020, and we would ideally like to see it give momentum to the bulls in 2022. 

There are ultimately three scenarios that can unfold:

  • Price could bounce and do a swift reversal to the upside. 
  • Price could break through and weaken further beyond $20,000.
  • Price finds comfort around the weekly 200sma, forming a sideways market before a breakout either to the upside or downside. 

As investors, we have absolutely no idea what could happen next, which is why we remain neutral and let price dictate. 

Jump in too early, and you leave yourself open to unfavorable results. 

Apply patience, and you maximize the potential to profit once the market determines a direction. 

I am playing it safe and monitoring from the sidelines. Cryptos move quickly, so once a direction has been confirmed, we can catch up for lost time through the power of compounding. 

When it rains, it will pour, so our patience will be rewarded. 

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