The valuation of the whole crypto market fell by over $2 trillion in just one year. The current market cap of all cryptocurrencies is $867 billion, while Bitcoin alone has a market cap of $332 billion.
The arrival of the new year is starting debates on whether there will finally be a reversal. We will analyze Bitcoin through several timeframes to determine the outcomes that might prone to happen.
Bitcoin (BTC) top-down analysis
🔴 The biggest #Bitcoin drawdowns ever
2011: -93%
2014: -85%
2018: -83.5%
2022: -77%— Investro.com (@investrocom) December 5, 2022
The weekly timeframe is showing some important signals. As Bitcoin trades below $20,000, it is clear that it has become severely oversold. Only a few times in history has BTC fallen like it did in the last twelve months, as shown in the tweet. As a result, many investors are now eyeing the crypto markets, but there’s still danger ahead.
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A bullish divergence predicted the last two and most significant Bitcoin pullbacks in the last year. Now there’s a third divergence, suggesting a new upward movement may occur. Bitcoin is currently up 12% from its November low.
Bitcoin weekly chart, source: tradingview.com
So yes, the bottom might be in, but two things could still send BTC lower. Unless the trend line is broken, there is no uptrend in sight. Moreover, there is a huge engulfing along with a gap that can signal a continuation of this downtrend. The cryptocurrency could tank at any time while filling the gap; the next few weeks will be crucial in determining the future trend.
Daily timeframe view
While the bullish divergence on a weekly timeframe suggests Bitcoin could be moving up soon, a bearish divergence on a daily timeframe shows it could still form a lower leg to $14k-$15k. This is the ideal time for long-term investors to dollar-cost average their positions as the bottom is nearing.
Bitcoin is currently at an important resistance of $17,557 (June’s low), so it could still bounce downward to form a new low. Bitcoin has been forming lower highs (LH) over the past few months. There is a high probability a new LH will be created, which will result in a lower low (LL) as well. The most important thing of all is to watch that trend line, because once Bitcoin gets above it, the uptrend can be back in play.
Bitcoin daily chart, source: tradingview.com
4-hour timeframe view
Bitcoin stopped at the moving average (EMA200) and resistance, indicating it could be ready for the next move to the downside. However, traders should wait for the confirmation signal by watching the trend line in a 4-hour timeframe.
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If this trend line gets broken, BTC could tumble another 15% to 20%. It’s vital to point out the fact, that this is one of the longest bear markets the crypto market ever recorded, so there is a very high probability that a local bottom formation is near. So even if Bitcoin falls another 15%, it won’t last there long like it didn’t in 2018, 2015, and 2011.
Bitcoin 4H chart, source: tradingview.com
If Bitcoin rises above $17,557, it may be headed back to almost $20,000, where there is a trend line. The probability of Bitcoin heading down in the short term is high, but it is very likely to bottom out at the end of the year or by the beginning of 2023.
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