Bitcoin – First Contrarian Buy Opportunity

In view of the sharp price declines, crypto investors are asking themselves these days whether the sector is already being stuck in a new “crypto winter” for almost seven weeks or whether the brutal pullback may have been just a healthy shakeout after all, laying the foundation for significantly higher prices in the medium term. 

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Review

Since the new all-time high at US$64,895 on April 14th, prices for Bitcoin have come under tremendous pressure. Currently, Bitcoin is “only” trading around US$33,000 USD and thus almost 50% lower than in early April! While Ethereum and numerous small altcoins were just getting ready for the grand finale, Bitcoin´s increasing fatigue was gradually becoming more and more obvious. Finally, the spectacular crypto bull run ended on May 12th with Ethereum´s parabolic new all-time high at US$4,375.

Consequently, the entire sector topped, and a merciless wave of liquidation followed, taking pretty much everything down with it. Bitcoin only temporarily found a low at US$29,500, as this low was slightly undercut again on Monday 24th of June at US$29,250. Ethereum, on the other hand, did not find any support at all in recent weeks and kept falling towards a new low at US$1,711 this week. This low was well below the panic low of June 21st at US$1,896. In the last 4 days, however, crypto bulls are trying to get back on their feet posting a nice transitory bounce from extremely oversold levels (Bitcoin +17.91%, Ethereum +19.5%).

You have been warned

Six weeks ago, we had warned of an imminent pullback in a timely and pretty aggressive manner. However, the fact that the crypto sector then took such a heavy beating just a few days later surprised us, too. The enormous volatility in May was mainly due to the preceding excessive speculation with leverage and borrowed money. For example, positions worth more than US$8 billion were closed on numerous exchanges within a few minutes on May 19th through forced liquidations. Also, in the last week falling prices have yet created another wave of liquidations.

Overall, bitcoin has at least managed to trade sideways between roughly speaking US$29,000 and US$41,000 in the last five weeks. However, things have not calmed down (yet). The bottom line is that since the beginning of the year, Bitcoin has experienced turbulent ups and downs and a small gain of about 20%.

Technical Analysis For Bitcoin in US-Dollar

Bitcoin in USD, weekly Chart as of June 27th, 2021. Source: Tradingview.

Bitcoin in USD, weekly Chart as of June 27th, 2021. Source: Tradingview.

On the weekly chart, bitcoin temporarily slipped out of its major uptrend channel to the downside. However, with a strong bounce it managed to return to this trend channel. If the bulls can actually defend this steep trend channel, prices below US$30,000 would not be seen in the future. Due to the violent correction in recent weeks, the stochastic oscillator is clearly oversold and would now offer more than enough room for a significant recovery.

Overall, bitcoin has been running sideways between US$29,000 and US$41,000 on its weekly chart for several weeks in a very volatile fashion. However, the up-trend is still intact. Hence in case of doubt, the bulls will now at least rehearse a larger recovery.

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Disclaimer: All published information represents the opinion and analysis of Mr Florian Grummes & his partners, based on data available to him, at the time of writing. Mr. Grummes’s ...

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