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Nexo

Bounce Or Die: Why Capitulation In Bitcoin Could Still Be Ahead

Tony Spilotro by Tony Spilotro
4 months ago
in Bitcoin
0

Bitcoin price is back at the low $40,000 range, the market is extremely fearful, and there’s plenty of macro influences to be bearish over. However, that’s often the best time to buy.

For now, it might be time to wait patiently a while longer to see if an ultra important level on the RSI can hold. If it doesn’t, capitulation could be in the cards. Here’s a closer look at why that might be.

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What Bitcoin Capitulation Looks Like: A History Lesson

Not only is Bitcoin trading at right around $42,000, it is also trading at a reading of 42 on the weekly Relative Strength Index.

The Relative Strength Index is a bounded technical analysis oscillator, giving readings between zero and one hundred. It was designed to signal when an asset is overbought or oversold, by reaching a reading over 70 or below 30 respectively.

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However, other levels on the RSI are of particular importance for some assets. In the case of Bitcoin, a reading of 42 is typically a buy signal.

Less than a handful of period exist where Bitcoin traded below this level on the RSI. These instances have occurred following rounded support being established, then broken. The only time this didn’t happen was back when Bitcoin was trading below $5 per coin.

BTCUSD_2022-01-18_10-49-18

With this RSI level hold? | Source: BTCUSD on TradingView.com

Why This Level On The RSI Matters For Crypto

Outside of the one anomaly, a rounded false bottom is established at a reading of 42 on the RSI, and is then broken to put in a final bottom and send the RSI below the key level.

If 42 on the weekly RSI is swept once again, the crypto market might experience capitulation like the first four times the RSI plummeted below it.

Related Reading | Bitcoin Realized Losses Remain Elevated Showing Sell-Side Hasn’t Exhausted Yet

Three out of four times had previous support broken. Of the three times this has happened, the most extreme fall afterwards caused another 68% collapse. Other times was closer to 50%.

Breaking below the support level could result in a sharp reversal to new highs, meaning that despite the reason to be cautious, the outlook isn’t all negative. There is also a chance that such a reading on the Relative Strength Index produces a strong enough bounce for one more wave higher before a more painful bear market arrives. Which is why Bitcoin is ultimately at a bounce or die level for crypto bulls.

Follow @TonySpilotroBTC on Twitter or join the TonyTradesBTC Telegram for exclusive daily market insights and technical analysis education. Please note: Content is educational and should not be considered investment advice.

Featured image from iStockPhoto, Charts from TradingView.com
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Tony Spilotro

Tony Spilotro

I'm Tony Spilotro. Behind the pseudonym, I'm a digital media executive and global remote work leader with a decade of content experience and excellence. Here, I explore my newfound passions pertaining to privacy, finance, economics, politics, cryptography, property rights, and other libertarian-esque views. I am a Bitcoin evangelist, maximalist, and educator whenever I can be, helping to spread its message of freedom from government control, monetary policy mismanagement, and passing the buck - literally – to future generations. My journey from a curious retail crypto investor to a serious Bitcoin advocate, trader, and technical analyst is an unusual one, but life-changing nonetheless and has become less about money and more about a long-overdue revolution. While a firm believer in the laws governing math and science, I am profoundly fascinated by the impact of astrology and astronomy including moon and solar cycles and planetary alignment and their ability to influence and potentially predict markets. It hasn't yet clicked for me as to how to put anything to use, but I consider it my current rabbit hole I can't yet dig out of. My perspective of growing up alongside the internet, the dot com era, the Great Recession, and roots in video games collecting coins and rare items caused Bitcoin to immediately make sense to me. Through all of these lenses, I seek to produce content that is educational and entertaining, and I thank you sincerely for taking the time to read what I have to say. Please follow me on Twitter and feel free to drop me a line if you would like to work together.

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