Bitcoin Looking Bullish Near-Term

2022年10月24日

In this analysis, we're going to do two things:

• Take a look at Bitcoin's short-term trajectory (forecast the price action for the next few days / weeks)
  
  
• Take a look at Bitcoin's long-term trajectory moving forward
  

The second part is going to be more important than the first one because we're going to revisit our assumptions that Bitcoin is due for another leg down. The reason for doing so is because there's a possibility that we may have already hit the bottom (nothing confirmed yet but read along to see the rationale for saying that).

As anyone observing the price of Bitcoin has noticed, the price has been trading sideways for the past few weeks.

Below is a quick look at Bitcoin on the H12 resolution:



As we can see above, Bitcoin's consolidation has created a traded range with an upper resistance at 20.3k and lower support at 18.6k (approx). From top to bottom, the total upside is about 8.6%, which hardly counts as volatility when it comes to Bitcoin.

Many traders on Twitter and elsewhere have been calling for Bitcoin to fall below the sturdy horizontal support resting at the 18.6k level. To gauge whether this is true or not, we're going to take a look at some of our momentum indicators to get a better idea.

Balance of Power RSI

We're going to start with the Balance of Power RSI, which is a custom indicator designed to track accumulation (buying) vs. distribution (selling).



Even though the Balance of Power RSI is designed to significantly smooth the normal Balance of Power signal (which is all over the place), its still somewhat hard to gauge whether there is definitive accumulation vs. distribution for Bitcoin here.

If we look closer, we'll see there's definitively been a noticeable positive trajectory in the indicator dating back to October 10th, 2022.



We'd be better served if we could plot a 'line of best fit' here for the Balance of Power RSI, but what we can glean from the 'eyeball test' should be sufficient to say that the indicator is telling us there's an increasing amount of underlying accumulation.

Librehash RSI(14)

The RSI(14) is designed to be read like any normal RSI. The difference here is that the RSI line changes colors based on the EMA of the rate of change (actual formula is a little more complex than this, check the actual indicator page for more details).

Main point here is that when the indicator flashes green, that means that the RSI(14) is signaling bullish momentum, red means bearish, of course.

Let's see what its showing us below:



From the chart below, we can see that while the RSI has been fairly choppy over the past several weeks, its overall trending trajectory has been pretty consistent (positive).



Librehash Volatility RSI

The 'Volatility RSI' is another custom indicator (this one publicly available for free).

The purpose of this indicator is to essentially track the volatility and the price direction all at once. As the line itself moves upward, so does the overall volatility. When the line flashes 'red' that means that the volatility is decreasing and when it flashes 'blue' its increasing (yes, that means that the overall volatility can be increasing while the price action within that time frame signals heavy consolidation).

Let's take a look at the indicator below:



As of right now, it appears that the Volatility RSI has retained a positive trajectory for some time.

Librehash Reversion Ribbon

Moving forward, we're going to take a look at the Librehash Reversion Ribbon on the daily resolution (remember we were on the H12 resolution before, so we zoomed out 2x here).

This indicator is another custom one, but to simplify, you can analyze this indicator the same way you would the MACD.

Let's take a look at what its showing us below:



Its important to note that when it comes to the Librehash Reversion Ribbon V2, there are multiple different readings we must glean from what its display in order to gain a better idea of what's going on.

Those factors are:

1. Where the ribbon is in relation to the histogram (zero line)

2. The coloring of the candles

3. Convergence or Divergence

One of the most notable observations that we can make here is the fact that the ribbon itself has traveled upward from where it 'bottomed out' at the end of August 2022.


Hopefully the photo above makes the ribbon's trajectory clear. If not, then the observation here is that the ribbon has moved vertically (upward) toward the histogram.

This is worth noting because, like the MACD, when the indicator's signal traverses below the histogram, that means that it is signaling the price action is in a bearish trend. Conversely, when the price action traverses above the histogram, the indicator is signaling that the price action is in a bullish trend.

As of right now, the ribbon is on the threshold of crossing above the histogram.

What This All Means in the Short-Term

All of the indicators we're reading are bullish, overall. That doesn't mean that the price is due to spike. It just means that all of the indicators are currently yielding bullish readings.

However, it doesn't appear that this has been reflected in the price action since Bitcoin's price has remained pretty ambivalent over the past few weeks.

If we revisit the price action again, we'll see that the price has been trapped in a traded range where the overhead horizontal resistance only stands 7-8% above the underlying horizontal support.



Thus, it goes without saying that one can enter into a long position from here but if you do, you might be waiting a while before the trade begins to bear fruit (however long it takes for Bitcoin's price to exit this lengthy period of consolidation that its been in).