Looking at charts and sentiment indicators, it appears a combination of extreme bearish sentiment and strong Fibonacci and Gann support has created today’s strong bounce in Bitcoin (BTC).
As of Friday, bullish sentiment in Bitcoin (BTC) was close to 10 percent bullish (Figure 1). This matched the low after the Bitcoin (BTC) crash in February 2018. In English, these people were too bearish. As a result, weak shorts covered quickly as soon as Bitcoin (BTC) bounced off support at $3,200 – $3,300 zone.
Looking at the bigger picture, the 200-week moving average (Figure 2) and a major Gann line acted as support (Figure 2) for Bitcoin (BTC).
Fibonacci circle analysis in Bitcoin (BTC) also helped create the bottom (Figure 3). It is not clear from this analysis whether or not a permanent bottom is in.
Perhaps the best case for a true bottom in Bitcoin (BTC) comes from the analysis of the 200-day moving average. Bitcoin (BTC) seems to have bottomed 62 percent away from the 200-day moving average. This is a similar distance to where the Bitcoin (BTC) bottomed in 2014 and early 2018 (not shown).
Looking at the short term tactical picture in Bitcoin (BTC), the 89-minute on the Bitmex contract shows resistance at $3,450. If Bitcoin (BTC) on Bitmex is able to sustain itself above the major resistance at $3,450, then it becomes easier to take the signals on long-term charts more seriously.
Bottom Line: There is a case for a bottom in Bitcoin (BTC), using long-term charts. That said, it is hard to distinguish a bear market bounce from a real breakout. The Fed meeting coming up on Dec. 19 will be a big determiner of future direction in Bitcoin (BTC). There is no way to predict the outcome of this meeting. Many powerful figures like the U.S. president and former Fed governors have publicly encouraged the Fed NOT to raise interest rates. As the Crypto.IQ trading desk will say, it is best to trade this market “level by level.” With the bounce in Bitcoin (BTC) underway, it is best to be careful about chasing the market if you are a short-term trader. Our trading desk estimates that, despite the long-term picture, there is only a slight chance that the recent bounce is true bottom.