BTC price could have formed a potential bottom due three reasons - 50-week EMA, five-month support trend line and bullish divergence.
Bitcoin price shed nearly 4% after the US Nonfarm Payrolls (NFP) or US jobs data came in cooler than expectations. This sudden crash in BTC caused the crypto markets liquidations of nearly $300 million on September 6. Investors are wondering if Bitcoin price correction is done and if they should buy BTC here or wait.
Why is Bitcoin Price Correcting?
On September 6, the Nonfarm Payrolls data showed no improvement in the jobs, suggesting worsening economic conditions in the US. This development is a continuation of the US stock market crash caused by July's worrying NFP data coupled with Bank of Japan's sudden interest rate hike. These two events set off a chain reaction that catalyzed financial market crashes across the US, Asia and Europe, triggering popular recession signals like Sahm and Joshi Rule to flash red.
Still, investors are speculating if the crypto market will continue to crash? Is Bitcoin price correction done?
Is BTC Price Crash Over?
On Friday, Bitcoin crashed nearly 4% and hit a low of 52,550. Since then, BTC has recovered nearly 4% trades at $54,300 today. From a technical perspective, Bitcoin price seems to have formed a potential bottom due to three reasons:
All of the above can be seen in the daily Bitcoin price chart below.
The 50-week EMA also played a pivotal role in supporting the 2020 and 2021 bull market correction. A recovery above this level in 2021 led to the rally that propelled BTC to an all-time high of $69,000. If history repeats, then a bounce off the 50-week EMA could propel BTC higher once again, kickstarting the bull run.
Next up, the five-month support trend line has been a reliable reversal point for Bitcoin in the past six months of sideways price action. Until this level is invalidated, it is safe to assume that it will hold and trigger a recovery rally.
Lastly, the Relative Strength Index (RSI) and Awesome Oscillator (AO) have both set up higher lows below their respective mean levels of 50 and 0, respectively. The recent move in RSI and AO from oversold conditions toward the mean levels Indicate a decline in bearish momentum. A flip of the 50 and 0 levels would suggest a bullish momentum comeback.
Supporting a potential reversal here is the spike in BTC whale transactions worth $100,000 or more and $1,000,000 or more.If these transfers occur after a price crash, it can be interpreted as whales accumulating and hence a potential bottom formation. On the contrary, if this indicator sees an uptick after a rally, it could signal local top formation
Although the BTC whale transfers did not reach the August 5 levels, there were considerable uptick in transfers worth $1 million or more, indicating that BTC whales are active.
So, judging by the Bitcoin price prediction, technical indicators and on-chain metrics, there is a high chance that Bitcoin correction is over. However, investors can look for a confirmation on the lower timeframe before making any moves.