Bitcoin has been in the red for 8 days in a row. Yesterday alone, we saw a huge drop of more than 15%. Such prolonged and severe declines are not positive for any investor, but especially for first-time investors, it can create a lot of doubt in the market.
Will bitcoin ever go back up again? Although I do not have a crystal ball, there are certainly reasons to believe that we are at or very close to the bottom. Let’s find out by taking a look at the prices.
Sideways trend
First of all, we will look at the 4-hour chart. From the beginning of May we are in a sideways trend, moving between the green box (support) and the red box (resistance). In the green arrows you can see that we tried twice to break through the red box to make room for a small rally, but it turned out to be short-lived.
Less than a day later we were back in the sideways trend, which we did not stay in for long. Shortly after, we lost support and currently 1 bitcoin equals about $23,000 (22,000 euros). Let’s take a look at the weekly chart to learn more about bottoming.
Two bottom indicators
Ten of the past 11 weeks have closed in the red, and this week is also in the red. After all those weeks in a downward trend, you would say it is time for a bottom. In order to be able to give more information about this, I have highlighted two indicators in this chart.
First of all, the red line. This is the 200WMA: 200 Week Moving Average. This is an indicator which adds up all the bitcoin weekly prices for the past 200 weeks and then averages them. Currently the 200WMA stands at around $22,350 (€21,400). This means that the average price of the past 200 weeks is $22,350.
200 and 300 WMA
Very cool, but what can you do with it? In bitcoin’s history, we see several times that this line is used as support, but is also crucial for bottom formation. As you can see in the image above, we formed a bottom on this line in 2015 but also in 2018. So the pressing question now is whether we will see the same thing this year.
If this is the case, then we are very close to a bottom for bitcoin and could see a bottom formed here in the coming weeks. However, if we drop down and close the week below the 200WMA, then it is possible that we will soon move to the green line.
The green line is the second indicator and this is the 300WMA: 300 Week Moving Average. Exactly the same principle as the 200WMA, but the average bitcoin price over the past 300 weeks. We have used this indicator as support once before, namely in 2020 during the corona dip.
