$5K Bounce? Bitcoin Price May Have Hit Bottom For Now

Omkar Godbole
Nov 21, 2018 at 11:01 UTC
Updated Nov 21, 2018 at 11:04 UTC
markets

Bitcoin (BTC) could be in for a stronger recovery rally in the next few days, having found a temporary bottom near $4,000.

The leading cryptocurrency, which hit a 14-month low of $4,048 on Bitstamp yesterday, is now trading at $4,580, representing a 2 percent gain on a 24-hour basis.

The $500 recovery seen yesterday indicates that the market is finally paying heed to the record oversold levels reported by the 14-day relative strength index (RSI). Currently, the indicator is still hovering in oversold territory below 30.00. As a result, BTC is unlikely to revisit yesterday’s low of $4,048 for now.

Further, the correction looks set to gather pace, as the RSI on the 3-day chart has dropped into the oversold region for the first time since January 2015.

3-day chart

Oversold readings on the RSI tend to put a bid under the cryptocurrency, historical charts show.

For instance, BTC bottomed out at $275 in the first week of October 2014 – with the sell-off looking overdone as per the RSI – and rose to highs above $400 in the next few days.

On similar lines, the oversold conditions signaled by the RSI in January 2015 likely triggered a recovery rally, pushing prices above $300 by mid-month.

As of writing, the RSI is hovering well below 30.00. Therefore, the cryptocurrency looks due for a break above $5,000.

4-hour chart and hourly chart

The bullish RSI divergence, seen on both the hourly and 4-hour charts, also indicates the recent sell-off has likely run out of steam near $4,000 and a relief rally could be in the offing.

Daily chart

On the daily, the primary trend remains bearish, as the 5- and 10-day exponential moving averages (EMAs) are sloping downwards. These averages, currently at $4,854 and $5,242, respectively, could cap any corrective rally.

View

  • Bitcoin could rise above $5,000 in the next few days, as per the oversold RSI on the 3-day chart.
  • The overall bearish outlook would be invalidated if the corrective bounce ends up pushing prices well above the 10-day EMA of $5,242.
  • The sell-off would resume if BTC finds acceptance below the 200-week EMA of $4,182, opening the doors for a drop below the psychological level of $4,000.

Disclosure: The author holds no cryptocurrency assets at the time of writing.

Bitcoin image via Shutterstock; Charts by Trading View

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This article is intended as a news item to inform our readers of various events and developments that affect, or that might in the future affect, the value of the cryptocurrency described above. The information contained herein is not intended to provide, and it does not provide, sufficient information to form the basis for an investment decision, and you should not rely on this information for that purpose. The information presented herein is accurate only as of its date, and it was not prepared by a research analyst or other investment professional. You should seek additional information regarding the merits and risks of investing in any cryptocurrency before deciding to purchase or sell any such instruments.