Bitcoin looks to have fought off a recent bear market breakdown that saw prices landing just above the yearly low of $5,755.
The suffering has been even worse for much of the altcoin market, some of which have been bleeding out to new yearly lows and seeing drops between 2–15 percent.
Major cryptocurrencies such as ether and XRP dropped by 2.95 and 9.6 percent respectively, before the world’s largest cryptocurrency by market capitalization took an about-turn, stabilizing prices and reversing some of the damage from yesterday’s chaos.
At time of writing, bitcoin is up 5.16 percent over a 24-hour period, according to CoinMarketCap, and is changing hands at $6,375.
Glaring out on the daily chart, the relative strength index (RSI), used to judge the momentum of a trend, has formed a bullish divergence (Aug. 8–14), whereby prices moved lower, but the RSI moved higher creating a ‘divergence’ from the current bearish setup.
This is this first positive move from the daily RSI since June 23, when the last divergence foretold of the July pullback from the bear trend, which saw bitcoin climb 40 percent.
Further, the MACD (moving average convergence divergence), also used to judge and interpret a trend, is printing bullish signs with the histogram (purple bars) ticking up in favor of the bulls.
The %K and %D lines (blue and orange) representing health and position of a stock are also itching to cross – a bullish signal that only strengthens when viewed from higher timeframes.
A monthly low slightly higher than the yearly low of $5,755 reveals the bears are becoming exhausted in their attempt to drive down prices with declining volume apparent since the middle of May.
It is also worth noting that the monthly RSI is at its lowest since October 1, 2015 – a level that may have potential to trigger a buying frenzy, reversing the bearish trend seen since Jan 1.
A drop below recent monthly lows would expose bitcoin to the yearly low of $5,755 as it fails to cement a higher high.
- A bullish divergence can be seen on the daily RSI – a sign of a potential reversal in the current bear market.
- The daily MACD shows promising signs with the histogram ticking up in favor of the bulls and threatening a bullish cross from the %K and %D lines.
- Declining bear volume on the monthly chart since the middle of May – keep an eye on the monthly close to see if bears fail to match or top the previous month (July volume), signaling exhaustion.
- Monthly RSI is at its lowest levels in two years.
- A drop below recent monthly lows would invalidate the bullish perspective.
Disclosure: The author holds USDT at the time of writing.
Bitcoin image via Shutterstock