Bitcoin ( BitcoinTC) has the potential to reach $47,500-$50,000 based upon its current trend's strange similarity with that in June through December 2019.
2019 Bitcoin Fractal
Bitcoin reached $14,000 on June 26, 2019. It then fell to $14,000 for the rest of 2019, mainly due to profit-taking sentiment and FUD sparked from the Bitcoin Cash hardfork.
In December 2019, the price of the flagship cryptocurrency plummeted to $6,500. It caused its 50-day simple moving mean (SMA), to fall below its 200 day SMA. This phenomenon is what technical chartists refer to as " death crossing". They see it as a sign that there will be more sell-offs.
However, Bitcoin bulls maintained the price above its 50-week SMA. One-day charts of cryptocurrency showed that bears tried to crash it below its 50-week SMA. These dips were bought by bulls each time.
Later, willful buys near the 50-week SMA led to a strong uptrend towards the 61.8% Fib levels. This represented a dropdown Fibonacci trace graph that was drawn from the $14,000-swing high to the approximately $6,500-swing lower.
In addition to two scenarios of bullish divergence, the 2019 fractal showed at least one: Bitcoin's price reached lower lows, while its daily relative strength indicator (a price-momentum oscillator) reached lower highs. It indicated weakness in the prevailing bearish momentum. It turned out that the price went up later.
Bitcoin rebuilt the 2019 scenario half-way in 2021. The cryptocurrency's correction from the record high of almost $65,000 resulted in BTC/USD landing at the same 50-week SMA support level around $30,000. Its move lower allowed for a death cross setup.
The chart below shows that Bitcoin's price action over the past week also pointed to a bullish divergence scenario.
TradingShot, an online market analytics platform, stated that a bullish diversification formation and a rebound from SMA support of 50 weeks could send Bitcoin prices back to the 61.8% Fib levels of the current top–to–bottom Fibonacci Retracement graph.
He explained that the 1W MA50 support is crucial as it is being achieved despite Bitcoin's lower lows (LL), while the 1D RSI are on higher lows (HL).
This is a Bullish Divergence, and was also observed in October and November-early December 2019. This divergence was sufficient to trigger the rebound to the 0.618 Fibonacci level of retracement.
TradingShot provided a chart showing that the 61.8% Fib level was close to $47,500. The profit target was also near $50,000 in the chart above.
These statements were made as Bitcoin finished its second quarter with a 41% loss. This is the worst drop since the 43% selloff in the fourth quarter 2018. The recent cryptocurrency drop was a result of a series of negative fundamentals. These include China's crackdown against the crypto industry, increased scrutiny by global regulators, as well as Elon Musk’s anti-Bitcoin tweets.
The Federal Reserve's hawkish tone also led to a decline in Bitcoin demand. To curb inflationary pressures, the U.S. central banking announced it would raise its benchmark interest rates before 2023. This announcement coincided with a plunge in Bitcoin/USD rates on June 16th and thereafter.
Despite strong headwinds Bitcoin was able to flotilla above $30,000, which is a psychological support level. It is currently at $35,000. The cryptocurrency's bearish bias is still intact, however, due to the strong resistance at $40,000
"One would expect that the longer that we don't have a $40,000-handle eventually support will crumble and give place to a sharp movement towards $20,000," Fawad Rahaqzada, an analyst with ThinkMarkets said to the Wall Street Journal. He noted that this leaves Bitcoin at crossroads during the third quarter.
TradingShot has been added
"Have all negative fundamentals been priced in?" Although we don't know the exact cause, the Bullish Divergence of the 1D RSI certainly indicates that they have.