Bitcoin’s trend has never been this weak before halving: Should bulls be worried? ๐จ This article is 4 years old...
Bitcoin’s trend has never been this weak before halving: Should bulls be worried?
2 min read
Updated: Apr. 25, 2020 at 9:27 am UTC
Cover art/illustration via CryptoSlate. Image includes combined content which may include AI-generated content.
In approximately 30 days according to estimates, Bitcoin will see its next block reward reduction or “halving,” in which the number of coins issued per block will get cut in half from 12.5 to 6.25.
Although halvings have traditionally been seen as an extremely positive event for the Bitcoin market, the past few months have seen the cryptocurrency slump from a macro perspective, with BTC trading a mere six percent higher since the December bottom of $6,400.
And as a result, the cryptocurrency is heading into this critical event so weak from a charting standpoint. But should this be a cause for concern for bulls?
Bitcoin’s macro RSI paints a harrowing picture
If you’ve traded an asset or read Bloomberg, you likely know of the Relative Strength Index (RSI) indicator โ a measure if an asset is overbought or oversold, determined by the strength of trends.
According to PlanB โ the prominent yet pseudonymous crypto trader โ the one-month RSI for Bitcoin has “never been this weak” so close to a halving, now just a month away. Indeed, the measure sits under 50, which is leaning towards “oversold,” when it was near 60 or slightly “overbought” prior to the previous halvings.
#bitcoin RSI … never been this weak before the halving pic.twitter.com/dBAoKo0agV
— PlanB (@100trillionUSD) April 12, 2020
It isn’t only PlanB who has recently discussed Bitcoin’s weak RSI.
Crypto trader Eric Thies remarked on Apr. 11 that Bitcoin’s “macro RSI [time] frames are looking bearish overall, suggesting an incoming drop after one last potential surge higher in the coming week.”
Backing this sentiment, he pointed to the fact that despite Bitcoin rallying just over 100 percent from the $3,700 bottom to the local highs of $7,470, it failed to push the RSI, an indicator of trend strength, over historical resistance levels. This suggests an imminent return to the downside.
PlanB’s S2F model & other bullish catalysts remain intact
While the abovementioned RSI reading may be seen as bearish when taken without context, the medium-term to long-term bull case for Bitcoin is anything but invalidated, analysts say.
Firstly, the one-month RSI is nearing a low point that has historically marked the start of Bitcoin bull runs. In fact, prior to the exponential rallies that began in 2012, 2015, and 2019, this indicator reached readings that were as low as they are now, prior to reversing to the upside in an explosive fashion.
And secondly, the recent weakness doesn’t falsify PlanB’s stock-to-flow model, which predicts that the fair price of BTC will rise towards $50,000 and $100,000 after the halving in May.
Data from Clark Moody’s Bitcoin dashboard says that the cryptocurrency is trading a mere 13 percent below the price predicted by the stock-to-flow model, well within the margin of error bands.
Not to mention, the stock-to-flow model was recently verified by a statistics expert through certain means of analysis. They wrote on their statistical experiments:
โAll of them fail to reject the hypothesis that stock-to-flow is an important non-spurious predictor for the value of Bitcoin. [โฆ] We can see stock to flow has a significant long run influence on price.โ
All this in confluence would suggest that while cryptocurrencies could trend lower in the short term, a case for long-term appreciation remains intact.
Bitcoin Market Data
At the time of press 9:27 am UTC on Apr. 25, 2020, Bitcoin is ranked #1 by market cap and the price is up 0.19% over the past 24 hours. Bitcoin has a market capitalization of $125.66 billion with a 24-hour trading volume of $34.21 billion. Learn more about Bitcoin ›
Crypto Market Summary
At the time of press 9:27 am UTC on Apr. 25, 2020, the total crypto market is valued at at $195.89 billion with a 24-hour volume of $117.85 billion. Bitcoin dominance is currently at 64.16%. Learn more about the crypto market ›
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In this article
Bitcoin, a decentralized currency that defies the sway of central banks or administrators, transacts electronically, circumventing intermediaries via a peer-to-peer network.
Eric Thies, a Seattle native, pursued his higher education at the University of Arizona.