How To Identify Bitcoin’s Reversal Signs

    • Bitcoin’s price could be at the tail end of the technical rundown but macro factors stand in the way.
    • The Fed is set to continue increasing interest rates to combat inflation.
    • Waves of BTC transactions in realized losses at the highest levels since 2009, which could trigger a rebound.

    The Federal Reserve’s two-day policy meeting ended on Wednesday with a shocker amid the need to slow down economic growth. All guns seemed to be focused on combating inflation, which is currently at a 40-year high in the United States. Experts expect global markets including stocks and cryptocurrency to continue suffering from the 75 basis points hike.

    Prior to this, Bitcoin’s tumbled to $20,000, dragging the entire market with it. Intriguingly, some altcoins like Ethereum, Cardano, and Solana reacted positively to the Fed news jumping considerably from their weekly lows. Meanwhile, BTC was barely holding above $21,700 amidst an intense tug-of-war brewing between buyers and sellers.

    What Awaits Bitcoin In The Short-term?

    Considering the daily chart, the flagship cryptocurrency appeared to be reaching the tail-end of the flash drop. This positive sentiment followed extremely oversold conditions and a positive divergence popularized by the Stochastic RSI. Traders should also be on the lookout for the index’s potential lift above 30; a move that might add credence to Bitcoin’s price turnaround.

    Consequently, the TD Sequential indicator in the same timeframe was likely to present a buy signal in the coming sessions or days. The signal calling investors to buy the dip would manifest as nine red candlesticks.

    A buy order is usually recommended when the low of the sixth and seventh bar is exceeded by the low of the eighth or ninth candles. In other words, this assures market participants that the overhead pressuring currently overwhelming Bitcoin’s price may soon fade to give way to a significant recoil.

    BTC/USD Daily Chart

    How Capitulation Is Set To Drive Bitcoin Price Into Recovery
    Tradingview chart: BTC/USD

    In the meantime, on-chain data from Glassnode revealed that BTC transactions are being conducted in waves of realized losses. Over the past week, this metric has seen the most realized losses since 2009 based on available data.

    It was worth mentioning that these waves represent extreme capitulation levels with retail investors hammered the most. Nevertheless, the same spikes can and may foreshadow the price bottoms and force a sustainable recovery.

    Bitcoin Net Realized Profit/Loss

    How Capitulation Is Set To Drive Bitcoin Price Into Recovery
    Glassnode chart

    Similarly, the MVRV ratio has dipped below the mean line (1) for the first time since March 2020, when it teetered slightly above $5,500. This was at the beginning of the COVID-19 pandemic. Note that the ratio dropped to 0.75 before resetting and propelling Bitcoin into a massive rally.

    BTC MVRV Ratio

    Glassnode chart

    For now, macro factors are likely to limit Bitcoin’s odds of recovery but as the MVRV resets, trust will begin to build up prompting a recoil. Support above $20,000 may also go a long way to keep bears at bay while ensuring stability reigns in the market.

    On the upside, delays should be anticipated at $22,500, the previous lower range limit at $26,500, and the upper range limit at $32,000.

    John Isige
    John is a cryptocurrency technical analyst, who looks at micro, macro and fundamental factors affecting market trends.

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