Bitcoin has experienced a decline of roughly 2% today, trading just under $68,000 after briefly surpassing $73,000 earlier this week. This latest movement has intensified the pressure on a cryptocurrency market that remains uncertain, particularly following multiple unsuccessful attempts to sustain higher price levels. However, some analysts believe this may not signal the onset of a further downturn.
Popular cryptocurrency analyst Michaël van de Poppe took to social media to share a chart indicating that Bitcoin might actually be approaching a bottom. This chart, credited to @JamesEastonUK, integrates three key indicators: Bitcoin”s price, the 1-month RSI (Relative Strength Index), and the copper-to-gold ratio. When analyzed collectively, the data suggests that Bitcoin is beginning to resemble previous late-bear-market scenarios.
The most striking feature of the chart is the bottom panel, which illustrates Bitcoin”s 1-month RSI. Currently, this RSI reading has dipped back to levels seen during significant bear markets in 2011-2012, 2015, 2018, and 2022. These historical instances were closely aligned with major cycle bottoms. This indicates that Bitcoin often reaches such low monthly momentum levels only after experiencing substantial market pain.
It is important to note that this does not imply that prices must stabilize immediately. Monthly indicators are typically slow-moving, and markets may remain weak even after hitting historically significant thresholds. Nonetheless, the current RSI reading suggests that Bitcoin is no longer in the overheated conditions that typically precede substantial declines. Instead, it appears to be in a zone where long-term bottoms can start to form.
Van de Poppe emphasizes that many investors might be underestimating the extent of this correction. Bitcoin”s price has already seen a considerable drop from its highs, and market sentiment has significantly cooled, with the monthly RSI now resting in a territory that has historically aligned with deep bear phases.
Another crucial aspect of the chart is the copper-to-gold ratio, which serves as a macroeconomic signal. Copper is often viewed as a bellwether for economic growth due to its industrial applications, while gold tends to perform better in times of economic uncertainty. A decline in this ratio typically reflects diminished growth expectations and a more defensive macroeconomic environment. Currently, this ratio is entrenched in a prolonged bear trend, marking the longest downtrend in the copper-to-gold relationship since the inception of Bitcoin.
Van de Poppe argues that a reversal in this ratio could indicate a strengthening business cycle and improved macro conditions, which would likely provide support for risk assets, including Bitcoin. While this might not lead to an immediate and dramatic price surge, it could facilitate a gradual recovery over time.
Overall, the analysis reveals that Bitcoin”s monthly structure is approaching levels seen in past bear markets, with the potential for a macroeconomic shift that could positively impact the cryptocurrency landscape.
