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The 2022 crypto bear market has been quite challenging for investors in the crypto space.
But bear markets eventually lead to fantastic buying opportunities—as long as you’re not too early.
After Bitcoin’s recent fall to a new, 2-year low, many crypto traders are now asking, “Has Bitcoin hit bottom?”
The current $BTC price action needs more time to play out for most technical indicators to be meaningful.
However, last week’s record volume levels alone mean that Bitcoin could be forming a major bottom now.
Why? Because record volume leading to big rallies in the following months has been a historical crypto trend.
In this post, we walk through a few key charts to show you why Bitcoin may be bottoming out now.
Continue reading our ‘just the facts” $BTC analysis below…
Has Bitcoin Hit Bottom? Let’s see what the charts say…
After months of stagnant, sideways price action, Bitcoin ($BTC) sliced through support of its June 2022 low to a fresh, 2-year low last week. Press weekly chart of $BTC above to expand image.
That prior support level at 17,600 (yellow line) has now become new, short-term resistance.
But despite Bitcoin’s fall to a new low, notice how new support of the prior downtrend line (purple line) kept the losses in check.
That downtrend line has become support because a prior level of resistance becomes the new support—AFTER the resistance is broken (and vice versa). This is a basic tenet of technical analysis.
Last week’s breakdown to a new low was obviously bearish, BUT a significantly positive signal was also generated—the highest $BTC volume WEEK ever (as shown above).
Bitcoin’s Highest Volume Day Ever
Bitcoin not only marked its highest volume week ever.
$BTC also had its highest volume DAY in history (November 8).
The big volume spike is shown on the daily chart below, along with new, short-term support and resistance levels to monitor (press chart to expand):
Current, short-term support and resistance levels for $BTC
When $BTC broke down to a new low on November 8, it found support and bounced off the 15,550 level (purple line).
The price action rebounded sharply the next day, but notice how the rally stalled right at new resistance of the 17,600 level (yellow horizontal line).This is a great example of how prior support can become new resistance (as explained earlier).
In the near-term, Bitcoin price is now wedged between support at 15,550 and resistance at 17,600. A decisive move beyond either of these levels could lead to high volatility.
Despite Bitcoin’s breakdown to new 2022 lows, the selling pressure eased pretty quickly after the November 8 sell-off that sparked a wave of forced liquidations (bullish due to less supply).
In the short-term, our short-term outlook in the Morpheus Crypto portfolio is neutral because we are anticipating a bit of sideways chop.
However, volatility could quickly pick up in this news-driven environment, so we are prepared for anything.
Is Bitcoin Bottoming Out? Volume Speaks Volumes!
Although the short-term trend of $BTC does not yet look good, recent volume patterns are signaling a potential rally in the intermediate-term.
As discussed above, Bitcoin just recorded both its highest daily and weekly volume ever.
Why does high volume matter?
Although often overlooked by newer traders, volume is widely considered to be one of the most reliable and important technical indicators for crypto swing traders to monitor.
Volume is the gasoline that drives market momentum in both directions. It is an indicator that never lies.
Some technical indicators can give deceiving signals, but volume shows us what’s really happening “under the hood.”
As the data below shows, massive volume spikes have historically preceded substantial $BTC rallies.
Check it out…
Bitcoin’s Top 7 Highest Volume Days (highest to lowest):
November 8, 2022March 13, 2020March 12, 2020November 9, 2022June 13, 2022May 19, 2021June 15, 2022
*BTC/USD @ TradingView (spot and derivatives combined)
Prior to last week’s record-setting Bitcoin volume days, the 6 previous highest volume days were from March 2020, May 2021, and June 2022.
Each of those three periods preceded a major Bitcoin bottom…
How much did $BTC rally after previous highest volume days?
Each of the six previous highest volume periods marked a Bitcoin bottom that led to a substantial rally in the following months. Check out the data below:
March 2020 – $BTC rocketed +163% higher in 2 months (3,800 to 10,000).
May 2021 – $BTC formed a price bottom, chopped sideways for 2 months, then ripped +80% higher in 6 weeks (29,300 to 52,600).
June 2022 – $BTC steadily gained +44% off the lows over 2 months (17,550 to 25,200).
November 2022 – Hmmm??
As the numbers above show, major volume surges have shown a tendency to occur before major bottoms in Bitcoin.
Again, remember that volume speaks volumes!
Will the bullish volume pattern lead to another bottom in Bitcoin?
If the above trend continues, then $BTC could be setting up for an intermediate-term advance.
Still, in the short-term, there needs to be some sort of impetus for the bulls to re-gain control.
One positive is that we may soon be reaching the point of maximum pain in the crypto market.
As with any financial market, bottoms are often formed when there’s blood in the streets.
Nevertheless, the rules of our crypto trading system prevent us from bottom fishing (a risky strategy).
Rather, we prefer to wait for bullish price and volume confirmation to get lower-risk crypto swing trade entry points.
PATIENCE is the name of the game right now, but stay alert for opportunity if history repeats itself.
Above all, remember to trade what you see, not what you think!
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