recent revival Bitcoin”s (Bitcoin 1.54%) Prices have proven to be the spark of life across the cryptocurrency asset class. Its market capitalization has become more valuable than the giants of the industry. walmart, Alibaba Group HoldingWhen meta platform.
in the meantime bitcoin Repurchases in the $20,000 range seem to be reviving investor interest, but the recent price swings may be just the beginning. Confidence in this comes from three indicators that have historically proven to be reliable in marking Bitcoin’s next foothold.
Understanding the indicator: Relative Strength Index
The Relative Strength Index (RSI) is a value used to measure the speed and magnitude of an asset’s recent price changes to assess whether it is overvalued or undervalued. RSI values range from 0 to 100. In traditional RSI usage, values above 70 indicate the asset is overbought. Values below 30 usually mean that the asset is oversold and therefore undervalued.
Investors can look at Bitcoin’s RSI on different timescales, but the most interesting one is the weekly one. After months of trading below 40 and bottoming out at some point in June 2022 at 26, Bitcoin’s latest move has seen the RSI hit around 50. This is an important threshold. Based on his RSI data in the past, Bitcoin reaching RSI 50 could be the engine of sustained momentum.
Periods where the RSI dipped below 50 and then climbed back up usually resulted in a spike in Bitcoin price, but there have been times when it has broken below the level about a month later. If Bitcoin can sustain this line for more than a month, a steady uptrend should be reason for cautious optimism that the worst of the bear market may be behind us.
Bitcoin health measure: 200-week moving average
Before calling for an end to the bear market, one thing needs to be done. That means Bitcoin has to recapture his 200-week moving average (WMA). Historically, few other indicators have proven as useful an indicator of Bitcoin health as the 200 WMA.
This indicator takes Bitcoin’s average price over the last 200 weeks and turns volatile and choppy-looking price action into a smooth line. The line has only broken below the 200 WMA five times in history, thus proving its resilience as one of Bitcoin’s strongest levels of support.
Bitcoin is still below the 200 WMA line, but is getting closer to this level of recovery by the day. If so, it may be the last time it has dipped below it for quite some time. When Bitcoin fell to the 200 WMA in the past, it was followed by renewed price momentum that usually marks the end of a bear market.
With 200 WMA and its current price of just a few thousand dollars, recycling may be all Bitcoin needs to see this crypto winter in the rearview mirror.
Analyzing Bear Market Trends: Comparing Duration
The last indicator is also the most basic and doesn’t need fancy lines. Comparing past bear market periods from top to bottom, investors are currently in the longest bear market in history. Historically, Bitcoin bear markets lasted for about 311 days.
Bitcoin’s all-time high was renewed on October 20, 2021 when it reached nearly $70,000. Assuming Bitcoin bottoms out to $15,700 on Nov. 21, 2022, these two dates are 397 days long, well above the average bear market.
Investing is about maintaining a long-term view, but it never hurts to look at short-term indicators to draw sound conclusions. strategizeThe idea is not for timing the market. Rather, the goal is to maximize profit. The combination of Bitcoin’s bullish RSI level, near 200 WMA recovery, and past bear market periods could be a great buying opportunity to grab Bitcoin before its price rises again. suggests that there is
Randy Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Meta Platform CEO Mark Zuckerberg, is a member of the Motley Fool’s board of directors. RJ Fulton I have a position in Bitcoin. The Motley Fool has positions in and recommends Bitcoin, Metaplatform and Walmart. The Motley Fool Disclosure policy.