Various signs indicate a possible rally in the short term now that the Bitcoin (BTC) price is nearly USD 20,000.
Bitcoin is trading at around USD 20,531 and has accumulated a 1% loss over the last 24 hours. While its daily trading volume is above USD 24.55 billion, its market capitalization is about USD 390.86, according to CoinGecko.
The recent increase in volatility has made it clear that the crypto market has entered a new winter. However, nobody knows how long it will extend.
Risk asset prices drop one after the other as the world economy falters and the US Federal Reserve (Fed) tries to get tough on inflation. The decentralized central bank recently announced the highest interest rate hike since 1994. They have tightened monetary policy twelve times since World War II but did not cause a recession only once.
Since there might be further drops in the short term, central banks may return to bailout measures to prevent economic catastrophe.
The Price of Bitcoin Seems to Be Capitulating
The price of Bitcoin has been falling even though its fundamentals remain strong, which could create long-term opportunities.
While the hash rate is at all-time highs, the production speed will decrease with each halving event. It is impossible to change the maximum circulation, and the network continues to work uninterruptedly. In the meantime, the amount of circulating US dollars, global debt, and inflation are increasing.
The selling speed has increased, leading short- and long-term holders to sell at a loss. That usually forms the bottom of the decline as positions curb bearish intent and weak hands leave.
According to the weekly CryptoQuant metrics overview, most on-chain indicators show bullish signals, suggesting an undervalued price of Bitcoin.
Given that the short-term sentiment is usually quite bearish, there might be further drops in the coming days. However, when volatility decreases, the bulls could return in force.
The Price Chart Needs a Respite to the Upside
The weekly BTC/USDT chart shows that the price is near a relevant support zone, which was the maximum of the bullish cycle in 2017. USD 20,000 causes extreme fear now, but it was a reason for euphoria two years ago, proving the market has grown.
The price is testing the 200-week SMA, which often works as a support to search for the bottom of bearish markets.
The Relative Strength Index (RSI) is in an oversold zone not seen since the bottom reached in the 2018 crypto winter.
The value of Bitcoin has fallen for almost 12 consecutive weeks without any healthy rebound.
There might be at least a relevant respite to the upside, but it is still early to say the bearish market has ended.
By Alexander Salazar
