Trading Bitcoin: Time to Buy the Dip?

Time to Buy the Dip?

This week has been a blood bath for Bitcoin and the cryptocurrency market as a whole. Today, Bitcoin’s low is $8k with price currently trading at $8.2k. Ever since we broke below the descending triangle, market sentiment has turned to profound fear.

Crypto Fear and Greed Index

From the chart above, you can see the Crypto Fear and Greed Index has dropped to severely fearful levels. Typically, collective market sentiment is wrong while the contrarians end up being on the right side of the trade. If you want to know how the index is calculated visit https://alternative.me/crypto/fear-and-greed-index/.

Daily

While bearish sentiment is overwhelming, Bitcoin has begun to find support at the 200MA (orange). The best argument to buy the dip is the fact that Bitcoin has never dropped below the 200MA during an uptrend/bull market. If you truly think Bitcoin is in a bull market then you may want to consider this historical statistic. While past performance isn’t always an indication of future performance, this pattern should be noted.

Relative Strength Index (RSI)

As you can see from the chart above, Bitcoin’s RSI is in extremely oversold territory. That being said, the drop from $6k to $3k in Nov. 2019 experienced deeper oversold levels. Therefore, if price closes below the 200MA (orange), then Bitcoin will likely experience further downward price action.

Conclusion

Over the course of many bull markets, Bitcoin has never dropped below the 200MA support level (orange). Therefore, the 200MA is a turning point between the bulls and bears in the market. There are two likely possibilities: Price either bounces off the moving average, indicating a tentative bullish reversal, or price closes below the moving average, indicating a bearish continuation. Until we receive a confirmation in the form of a breakout or breakdown, price will remain neutral at the 200MA.

Disclaimer: The author of the article hodls BTC.