A painful pullback in the Bitcoin (BTC) market earlier this week sent the price below $ 40,000 for the first time since September 2021.
Many analysts predicted that the decline would continue towards the $ 30,000 to $ 35,000 range, but the price rallied back to $ 40,000 as support again and on Wednesday BTC made an abrupt move above $ 44,000. This reignited hopes that the $ 40,000 level is perhaps where Bitcoin can bottom out before continuing its move higher in 2022.
Jurrien Timmer, the global macro director of Fidelity Investments, rated to $ 40,000 as a “fundamental support”, pointing out that Bitcoin has become “technically oversold” close to the level, which may amount to a rebound in the short term.
At the center of Timmer’s bullish outlook were three catalysts: a stochastic RSI, the so-called S-curve model, and a Bitcoin-gold ratio metric.
A Clear Bounce On Bitcoin’s Stochastic RSI
In detail, Stochastic RSI is a momentum indicator that compares the closing price of an asset with its range of highs and lows during a specific period. The indicator ranges from 0 to 100, with the area above 80 pointing to “overbought” and the area below 20 warning of conditions of “oversold”.
The indicator helps traders detect trend changes by tracking the relationship between their high-low range (% K) and the moving average of the same high-low range (% D). Thus, the market returns a buy signal if the% K wave crosses the% D wave from below in the oversold territory.
Similarly, it returns a sell signal if the% K line crosses the% D line from above into overbought territory.
As Timmer points out, heBitcoin’s% K wave has risen above the% D wave, signaling a buying trend just as the price held support above $ 40,000.
“Bitcoin has hit a line in the sand at $ 40,000 and is now technically oversold,” tweeted Timmer early Wednesday, adding that “like $ 30,000, the $ 40,000 level appears to be a fundamental support zone.”
Price is modeled on the S-curve
Timmer further identified a so-called demand curve – as shown through the pin wave in the chart below – that has been instrumental in predicting the end of Bitcoin’s bear cycles since 2012.
Between April and June 2021, the curve followed the price action of BTC on the rebound from $ 30,000, and now, it has been acting as the same support near $ 40,000, raising the possibility that BTC’s next bounce could reach levels close to $ 100,000.
“The $ 30,000 level in 2021 provided support based on my demand model (S-curve model),” wrote Timmer, adding:
“That same level appears to have risen to $ 40,000, providing fundamental support once again. It is a moving target that generally provides a fundamental anchor for price.”
BTC / Gold Ratio Suggests Bitcoin Is Oversold
Bitcoin also appears to be oversold, albeit “moderately”, when it comes to its price relationship to gold. As Timmer pointed out, the so-called BTC / Gold ratio has slid to support at 22 after having peaked twice at 37.4 in 2021.
Meanwhile, the crash pushed the Bollinger Bands out of the ratio into oversold territory, a classic buy signal indicating that capital could start to move from gold to the Bitcoin markets.
All in all, these charts tell me that Bitcoin should have both technical and fundamental support at USD 40k. It doesn’t mean it can’t go lower, but it looks like USD 40k is the new USD 30k. / END
– Jurrien Timmer (@TimmerFidelity) January 11, 2022
Ultimately, these charts tell me that Bitcoin should have both technical and fundamental support at $ 40,000. This doesn’t mean it can’t go lower, but it looks like $ 40,000 is the new $ 30,000.
The prediction came in line with Bloomberg Intelligence’s recent crypto outlook.. Written by your senior commodities strategist, Mike McGlone, The report identified capital turnover out of gold and into the Bitcoin market. McGlone also noted that the trend would continue, especially in the face of a nearly four-decade high in inflation, which is the result of the loose monetary policies of the US Federal Reserve.
“We see gold more likely to move towards $ 2,000 an ounce in 2022, but Bitcoin to rise faster,” wrote McGlone.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Each investment and commercial movement involves a risk, you must do your own research when making a decision.
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