Bitcoin (BTC) may be on the verge of establishing a local bottom following a significant drop exceeding 35% from its peak of approximately $126,200 recorded two months ago. This assessment is supported by a combination of technical indicators and on-chain data that suggest a shift in market dynamics.
One of the most telling signs is the recent behavior of Bitcoin sellers, who appear to be nearing exhaustion. As of December, the weekly Stochastic RSI for Bitcoin has begun to rise from oversold territory. This particular pattern has historically indicated crucial turning points in the market, often preceding price rebounds. Notably, similar bullish crosses were observed in early 2019, March 2020, and late 2022, each coinciding with significant market lows.
Additionally, Bitcoin”s three-day chart reveals a bullish divergence, where the price has recorded a lower low while momentum indicators did not follow suit. This phenomenon has been a precursor to recoveries in past market cycles, including the mid-2021 correction and the aftermath of the FTX collapse in 2022.
Another critical factor pointing to a potential bottom is the recent miner capitulation, evidenced by a 4% decline in Bitcoin”s hashrate leading up to December 15. Analysts from VanEck, including Matt Sigel and Patrick Bush, view this decline as a bullish contrarian signal associated with miner capitulation. Historical data reveals that periods of sustained hash rate compression have often preceded stronger returns for Bitcoin, with a positive correlation observed following similar declines since 2014.
Looking ahead, there are indications that a Bitcoin rally could materialize within the next four to six weeks as macro liquidity conditions show signs of improvement. Analyst Miad Kasravi”s backtesting of 105 indicators has identified that the National Financial Conditions Index (NFCI) often signals upcoming Bitcoin rallies. The NFCI, currently sitting at -0.52 and trending downward, has previously aligned with significant price increases in Bitcoin following similar readings.
Moreover, potential catalysts like the Federal Reserve”s strategy to swap mortgage-backed securities for Treasury bills may mirror the liquidity-driven environment of 2019, which preceded a notable Bitcoin rally. Despite these optimistic indicators, some market observers remain cautious, forecasting potential price declines with targets ranging from $70,000 to $25,000.
As always, investors should proceed with caution, as each trading move involves inherent risks. It remains essential for market participants to conduct thorough research before making decisions, especially in a highly volatile environment like cryptocurrency.
