Despite recent weakness, Bitcoin has just flashed a powerful technical signal that indicates a Bitcoin bottom may be coming soon. Here’s what you need to know…
The 2022 crypto bear market has been quite challenging for investors.
But after Bitcoin’s latest move lower, many crypto traders are now asking, “Has Bitcoin hit bottom?”
One highly reliable technical indicator hints that Bitcoin indeed may be bottoming out.
Continue reading for simple, objective technical analysis (not hype) that explains why the Bitcoin bear market may soon be nearing an end.
Bitcoin ($BTC) experienced 2 major technical events last week that deserve attention.
Despite an ugly week of selling, 1 of those 2 technical events may have actually been positive for Bitcoin:
- Breakdown to a new 2-year low
- Highest volume ever
Let’s start with the breakdown to a new low, as shown on the longer-term weekly chart below:
As shown above, $BTC broke down below support of its June 2022 low to a new 2-year low last week. Now, that prior level of support at 17,600 has become the new resistance point.
Remember, the most basic tenet of technical analysis is that a prior level of support becomes the new resistance—AFTER the support is broken (and vice versa).
As such, former resistance of the long-term downtrend line became the new support level after Bitcoin price broke the resistance last month. Notice how last week’s low held at the downtrend line, forming a short-term Bitcoin bottom.
Bitcoin also registered its highest weekly volume ever. We’ll discuss the significance of this shortly.
Next, let’s zoom in to the shorter-term daily chart pattern:
When $BTC broke down to a new low on November 8, it found support and bounced off the 15,550 level.
When the price bounced sharply the next day, the rally stalled right at new resistance of the 17,600 level (yellow horizontal line). This is a great example of how prior support can become new resistance (as explained above).
In the near-term, $BTC is now wedged between support at 15,550 and resistance at 17,600.
Given the plethora of overhead supply at higher prices, current resistance holds more weight than the single day of support.
As such, odds now favor sideways to slightly lower prices until $BTC gets back above the 17,600 level. However, a period of sideways chop seems more likely than substantially lower prices.
Has Bitcoin hit bottom?
Clearly, the $BTC weekly and daily charts do not look good now. But has Bitcoin bottomed out?
Last week’s historical volume levels indicate that a major Bitcoin bottom may indeed be coming soon.
As mentioned above, Bitcoin just printed its highest historical week and day of volume.
Although often overlooked by newer traders, volume is arguably the most important and reliable technical indicator in existence (other than price).
Volume is the gasoline that drives market momentum in both directions, and is an indicator that never lies.
Whereas certain technical indicators can sometimes be deceiving, volume shows us what’s really happening “under the hood.”
Paying attention to volume patterns in the crypto market is a highly reliable and insightful way to predict future price trends.
So, what does Bitcoin’s highest historical volume tell us? Check out the chart below:
Bitcoin’s top 7 highest volume days:*
- November 8, 2022
- March 13, 2020
- March 12, 2020
- November 9, 2022
- June 13, 2022
- May 19, 2021
- June 15, 2022
* BTC/USD pair from TradingView (spot and derivatives combined)
Excluding the present, the highest volume periods were March 2020, May 2021, and June 2022.
What do those three periods have in common?
All 3 high volume days preceded a major Bitcoin bottom.
March 2020 – Bitcoin rallied +163% (3,800 to 10,000) over the next 2 months (March 13 low to May 7 high).
May 2021 – Bitcoin bottomed out, chopped sideways for 2 months, then zoomed +80% higher (29,300 to 52,600) over the next 6 weeks.
June 2022 – Bitcoin formed an intermediate-term bottom to prior months of selling. $BTC rallied for two months and gained +44% (17,550 to 25,20)
November 2022 – ??
Based on the data above, it seems that major volume surges have been a sign of stealth institutional accumulation–which tend to mark significant bottoms.
Remember that volume speaks volumes!
Will the bullish volume trend lead to another Bitcoin bottom?
If the previous trend of the highest volume days continues, then $BTC could be setting up for an intermediate-term advance.
However, with Bitcoin at a new 2-year low and the FTX meltdown scaring investors, there needs to be some sort of impetus for the bulls to re-gain control.
But even if the bulls stay away for now, the major selling may be drying up due to less forced liquidity issues.
Many over-leveraged players have now been forced out of the market. This is a positive step for building a solid foundation for the eventual rally that will come.
It also seems we may be reaching the point of maximum pain in the crypto market, which often marks a significant Bitcoin bottom.
But without a short-term impetus to buy, $BTC may now see an extended period of sideways chop, rather than a V-shaped recovery.
Of course, this is just one possible scenario. Anything is possible in the markets–especially crypto.
We at least want $BTC to prove it can stop setting lower lows and show some improving price/volume action. This will help improve our risk/reward ratios for entry.
PATIENCE is the name of the game here, but we will be ready to jump back in after Bitcoin has bottomed out.
Remember to trade what you see, not what you think!
Bitcoin Bottom: Massive Volume Hints Bitcoin May Soon Bottom Out was first posted on November 15, 2022 at 4:05 am.
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