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Bitcoin showing signs of life again, as enthusiasts ignore BTC pessimists

Bitcoin enthusiasts have a right to choose whom they want to believe when it comes to the fate of their favorite digital asset. Although Bakkt is old history and its wave of pessimism has dissipated to a large degree, there is still a cadre of analysts that are adamant about Bitcoin visiting lower realms, possibly as low as the $6,000s, if you buy into their rhetoric. BTC advocates, however, are seeing glimmers of hope, if only from a technical perspective. Bitcoin tends to ignore technical imperatives, but it could happen.

In the process of diving into the high $7,000s over the past two weeks, Bitcoin once again demonstrated its resiliency by bouncing back over $8,000. It seems to be back to its old form of two steps upward, then one step down, a sign that, in the past, was always interpreted as a possible accumulation phase, perhaps a few institutional “Big Boys” loading up on the digital token. But a curious things have happened, which can be viewed on a number of timeframes. Let’s start with the standard daily BTC rendition:

No matter where your eye travels on this chart from Coinbase, except for possibly the Daily line chart on the right, you can easily pick up on a positive tidbit that portends an upper move is imminent. For example:

  • The MACD Histogram has finally moved back into green territory. The last time we saw that move happen was in later September, when Bitcoin jumped up and tagged the $11,000 level or just below it:
  • The Relative Strength Index (RSI) has formed a nice little “bullish” divergence, bouncing off of an oversold backstop and now climbing back over its midpoint;
  • The “Bullish outside bar candle” forcefully absorbed the entire red body from the day before, a sign of strength and that bulls may be waking up from their brief slumber. This type of candle is a sure sign that optimism triumphed for the day;
  • There is one more obscure technical formation that really has everyone excited about its potential and that has to do with the “Double Bottom” formation that began to take shape in the last week of September. The pattern is more discernible on a 6-Hour version of Bitcoin price behavior, but suffice it to add that the second bottom is a little higher than the first with a “Neckline” at roughly $8,500. If this scenario plays out like the odds claim it should, we could be talking about $9,500 Bitcoin in a week or so, a nice thought to carry to bed with you.

Of course, all is not perfect in Bitcoin quasi-paradise. The Daily line chart is cause for concern, since lower highs and lower lows, the definition of a downward trend, are not going away anytime soon, or so say the pessimists in the crowd. To further spoil your day, these same folks will swear that Bitcoin is not out of the woods until it can reclaim a spot and close above its 200-Day moving average. This important watermark is now formidable resistance at about $8,600 and stands in the way of a BTC celebration.

As technicians try to ferret out the best insights by applying their best skills, it is time to remember the underpinnings of Technical Analysis (TA) in the first place. It is based on three factors: 1) Price is the ultimate arbiter and it is the result of “all” market forces; 2) Market price behavior often repeats in the form of patterns; and 3) The market tends to move in trends and continues to do so until new forces can swing the tide between buyers and sellers.

TA, however, can only point to probabilities that a particular event will take place. It is never, nor is it ever meant to be a certainty. Market sentiment often revolves around the perception of reality and moves as a herd. Indicators have been devised to discern the momentum in prior patterns of price behavior and to gauge investor sentiments. Academics may decry the effort, but millions have been made with it. For now, there are several patterns that might prevail, or as Mark Twain is credited as saying: “History doesn’t repeat itself but it often rhymes.”