4 Signals That the Bitcoin Crash Might Soon Reach a Local Bottom
A bullish case isn’t on many people’s minds – but signs are cropping up that Bitcoin may indeed be headed for a trend reversal. Here are some signs explaining why BTC might be overdue for a renewed uptick.
Bitcoin reached its all-time high of almost $65K on April 14, 2021, a little over a month ago. However, over the past 10 days the price violently broke down from the $50K mark and even reached $30K last Wednesday.
Bearish sentiment affected the whole crypto market, as altcoins suffered even more: ETH, which saw its all-time high of $4400 just 11 days ago, dropped below $1800 earlier today, before a slight correction as of writing these lines.
Where is the bottom for this ongoing crypto bloodbath? No one knows, but it might be worth keeping an eye on the following optimistic signals.
Crypto Fear & Greed Index: Remember April 2020?
The crypto fear & greed index is now at levels not seen since April 2020, which is about the time when the last crypto market crash occurred, taking BTC down below $4,000, losing over 50% in two days at the peak of the pandemic “Black Thursday.”
In hindsight, it was an amazing time to buy in, but it wasn’t necessarily obvious back then. These days, Bitcoin has fallen over 50% from its ~$65,000 high down to $30,000 on Wednesday – is the index right once again, and is this crash a blessing in disguise for people with stablecoins on the sidelines?
here are some times in the last 2 years fear and greed was sub 15.
make of it what you will. pic.twitter.com/TlLe7B7Q5C
— Bluntz (@SmartContracter) May 23, 2021
S2F Model: Lower Band At $30K
Similarly, the stock to flow (S2F) model indicates that BTC is due for an upwards rebound at the $30,000 mark given its stage in the cycle. The S2F model treats Bitcoin as a commodity (given that it has a fixed supply and limited issuance, similar to gold) and thus factors in circulating supply and production speed in order to determine scarcity and therefore price.
IN BITCOIN’S SHORT HISTORY, the S2F model and 4-year cycle have been proven to be reliable. As stated by PlanB, the creator of the model: The continuation of this crash into the next few weeks (effectively the end of the bull cycle) would invalidate the S2F model and 4-year cycle model, which have so far been sound – many analysts predict that it’s not yet time for things to turn around for the worse.
S2F currently plots the lower band at $30K, which is this week’s current low.
On-Exchange Stablecoins At ATH, Waiting Aside?
The amount of stablecoins on exchanges is at a yearly ATH – Lex Moskovski opines that there are ‘a lot of bullets waiting to be deployed from the sidelines.’
Of course, this could merely be a function of a large number of new entrants into the cryptocurrency ecosystem, but it most likely means big players are gearing up to bring in large buys.
In addition, John Bollinger, the creator of the Bollinger Bands indicator, believes that BTC might be nearing a local double bottom.
All of these indicators come together and paint a better picture of Bitcoin’s immediate short-term potential than the market is making it out to seem. After the past few days’ waves of incessant bearish moves, it may be time for BTC to take a breather, as RSI indicates that we are heavily oversold.
Vaporware Altcoins Bleeding Out – BTC Dominance Rising
It’s clear that altcoins have more to worry about – Bitcoin dominance has hit a local bottom at ~40% and has been steadily trending upwards (currently sitting at 47%). It’ll most likely recover even more as the market sheds off the excess weight that had been added on by vaporware coins fuelled by the speculative altcoin mania bubble.
Thousands of new coins (mostly in the form of BEP-20 and ERC-20 tokens) have been created hoping to emulate the success of older meme coins such as Dogecoin. Whereas several of these coins garnered market caps in the millions, it was obvious that something of such magnitude could never be sustainable once taking into consideration their lack of fundamental utility.
As such, it’s fair to assume that smart money has begun the transition away from low cap altcoins and back into Bitcoin, the inevitable king of cryptocurrencies.