The value of Bitcoin has severely depreciated, hovering at around $8,000 from its previous high of $10,000. With an uncertain market trend, some analysts proposed that market sentiment may still be bearish and that Bitcoin has the potential of reaching $5,000.
However, a market analyst recently pointed out a possible bullish divergence in his technical analysis, which may indicate a possible trend reversal.
Prior to the crash, the pattern of Bitcoin’s price movement formed a descending triangle, which according to technical analysis indicated that the price may soon move either up or down. Struggling to reach old highs, as the asset already corrected from $14,000 last summer, combined with the launch of Bakkt, who only managed to establish a trading volume of 71 Bitcoins on its first day, Bitcoin ultimately fell apart and dropped up to 20%.
Additionally, the hash rate of Bitcoin’s blockchain network fell up to 40%, which also had an effect on the market price. The sudden event raised the suspicion of centralized mining networks, who may have maliciously turned down their mining activity so that it coincides with Bakkt’s pessimistic launch. With the two events combined, Bitcoin had nowhere to go but down.
Four days after the launch of Bakkt, a Bitcoin futures trading platform, the exchange’s trading volume is gradually increasing. As some market analysts have previously explained, the adoption of Bakkt by institutional traders may be progressive, and not instant as thought by some.
As most in the cryptocurrency community became instantly bearish towards the future of Bitcoin, a market analyst with the twitter username ‘The Wolf of All Streets’, pointed out that we may experience a rebound soon.
Known as Scott Melker, who is both a cryptocurrency analyst and a DJ, Melker spotted a hidden bullish divergence while looking at Bitcoin’s price chart. Interestingly enough, he has soon enough found one more bullish signal that possibly indicates the market’s revival.
Resting at a 50 EMA on the weekly chart (Exponential Moving Average), the analyst claims that it could provide valuable support to the market capitalization of Bitcoin, which could in return bounce and form a triangle.
Melker considers the value of $7,440 to be an important support level, as it is similar to Bitcoin’s previous rallies that led to higher prices.
The bullish indicators that Melker pointed out, such as the historic support level, could only go wrong in the case that Bitcoin faces with yet another drop. However, now that the digital asset depreciated up to 20% in terms of price, it is unlikely that the asset will drop even further in value. The realistic situations seem to be that the entire market will consolidate and stabilize.
Taking a look at 2019, the price of Bitcoin surged by 300%. While it is unlikely that traders will take their profits or losses this close to yet another bull run, there are still some investors in the crypto community that prefer stability. The most likely players to leave are margins traders, who had their longs liquidated with the recent fall of Bitcoin.