The Big help to determine which direction Bitcoin by market capitalization will go is to learn to read the charts that show the market capitalization evolution.
Weekly charts - MACD
The Moving Average Divergence Convergence (MACD) indicator. MACD is an accurate indicator for buying and selling Bitcoin. If the weekly chart shows the blue MACD line is starting to point down, but beware of getting toward the orange signal line.
BTC/USD 1-week chart. Source: TradingView
The orange signal is alerting investors and traders to either sell or short. The history of Bitcoin has known two MACD crosses:
- bullish MACD crosses - the blue MACD line crosses up the orange signal line;
- bearish MACD crosses - the blue MACD line is under the orange signal line.
Now we see a bearish MACD cross, but they are infrequent — both situations would occur once a year, maybe twice.
Due to the Covid-19 pandemic and other factors, in the last 18 months, they crossed once every two months on average since the beginning of the 2018 bear market. Both situations would occur once a year, maybe twice.
The last time Bitcoin crossed bearishly on the MACD, the price of Bitcoin almost immediately 57% decline after they crossed. Now we see another bearish MACD cross.
Here it is the panic for another price drop.
BTC/USD 1-day chart. Source: TradingView
Looking at the daily chart things still, let us blurred about the situation. The graph shows that $10,400 is the resistance while $8,800 is the support.
Right now, according to the Fibonacci levels, Bitcoin is dangerously close to the support level, and losing this level opens up $7,900 as the first downside target.
1-hour chart – RSI indicator
Another help for a fairly trading is the 1-hour relative strength index (RSI) indicator that shows that buyers stepped in as it approached oversold territory around 31.40. Be well aware that anything below 30 is considered a strong buy signal.
BTC/USD 1-hour RSI chart Source: TradingView
As you can see, on the higher time frames between the 12h and monthly charts, the RSI is very much in the middle, providing no clue as to which way the market is going to go. In this case, there are two scenarios: the bulls will take charge and push up BTC price 50% or, the bears will drive the price down by an equal percentage.
Recently, Bitcoin halving mining rewards, the permanent price drops, and the client sentiment are just the most visible factors that influence the Sword of Damocles Bitcoin situation. Remember, each method you use to help you trade safely, be open-minded, learn from every mistake, and take risks.
Using the same chart and Fib levels, an optimist would say that after $9,800, the last area of resistance sits at $10,400, while a pessimist would go down to the bearish scenario and fear the drop of $8,800 down to $7,600.
So, are you an optimist or a pessimist?