If you’ve perused Crypto Twitter at all over the past months, you’ve likely seen the term “Bitcoin echo bubble” mentioned over and over again; bears of BTC and its ilk believe that the cryptocurrency market is in the midst of effectively a “do-over” of 2018’s Crypto Winter.
Related Reading: Crypto Tidbits: Bitcoin Dives Under $8,000, Fidelity Bags Trust License, SEC Takes Second Look at ETF
While some have laughed this off as pure conjecture, citing the fundamental developments of the cryptocurrency ecosystem and adoption events, there are some technical analyses backing the idea that Bitcoin is in the midst of an echo bubble, and will thus fall further from $7,100, where BTC trades today.
Bitcoin to Close Under Key Level
Trader Walter Wyckoff recently made a simple though astounding revelation: if Bitcoin closes the week on Sunday under $7,500, the price will have settled under the 100-week moving average, a key indicator of long-term support. This is important as the last time BTC closed under this support level, the cryptocurrency’s price fell by 35% in the three weeks that followed.
If history repeats, Bitcoin could drop to the high-$4,000s or low-$5,000s and then bottom from there, then begin its next leg higher.
I was just checking MAs on weekly and previous price action, last time we closed under 100 MA we dumped -35%, if this happens again we could land again on the 200 Weekly WMA. Have to say it has confluence with @TraderX0X0 previous analysis pic.twitter.com/jCuqvkw0VC
— Walter Wyckoff – $OIL maximalist (@walter_wyckoff) November 24, 2019
What’s interesting is that $5,000 is where a number of analysts, not just Walter, expect for BTC to find a long-term bottom. Per previous reports from NewsBTC, an analyst going by Mac remarked that $5,100 will be the ultimate bottom of this recent downtrend because there exists a key confluence of support levels at that level: the double-month volume-weighted average price, a “price inefficiency fill” level, and the 200-week moving average.
A 35% drop to $5,000 also corroborates 888Velvet’s analysis, in which he called the recent drop from $8,000 to $6,700 over a week ago. The analyst’s chart implies that Bitcoin will bottom somewhere in the $5,000s or $6,000s — just as the abovementioned analyses expect too.
Not so Fast
While there seems to be downside momentum, there is one indicator signifying that the bottom may be here. This is the Bitcoin Fear & Greed Index, which factors in a fair mix of volatility, market momentum and volume, social media trends, surveys, dominance, and Google Trends.
The Index printed a 23, which is on the “extreme fear” side of the oscillating indicator, just today. The reading of 23, and thus “extreme fear,” are relevant because many believe that emotions drive markets, especially the cryptocurrency market. As analyst RektCapital wrote in a recent blog post:
“Human psychology tends to be predictably irrational because many people tend to react similarly in certain contexts… Baron Rothschild made a fortune by buying when others sold in panic. His philosophy was to ‘Buy when there’s blood in the streets.’ Because the greater the fear — the larger the opportunity for profit.
Related Reading | Uncommon Bitcoin Metric Suggests Massive Profit Taking Is Underway
Featured Image from Shutterstock