It’s still winter in the digital-assets market, and yet crypto Twitter is going bottom fishing.
And why not, as bitcoin (BTC), the leading cryptocurrency by market value, has recently bounced 10% to over $17,000 despite lingering FTX contagion fears and crypto lender BlockFi filing for bankruptcy.
Federal Reserve Chairman Jerome Powell on Wednesday signaled that the central bank could slow the pace of its liquidity-sucking interest rate hikes starting this month. Popular technical analysis indicators signal downtrend exhaustion in bitcoin.
Some experts, however, called for caution as bitcoin’s price action is yet to satisfy all conditions necessary to confirm a bear market bottom and a bullish revival.
“As we have seen three attempts this year that eventually failed, we need to wait for bitcoin prices to trade above their 21-week moving average ($20,851) in order to call for a sustainable rally and a cyclical low,” Markus Thielen, head of research and strategy at crypto-services provider Matrixport, said.
Bottom fishing refers to investing in an asset with a substantial price decline. The high-risk, high-reward approach is based on the assumption that the asset is undervalued and due for a reversal higher.
Bitcoin turned lower from its 21-week moving average in early November and fell to a two-year low of $15,460 on Coinbase. The late March attempt to scale the average also paved the way for a deeper sell-off.
Therefore, a convincing move above the average is needed to confirm a bottom.
According to Caleb Franzen, founder of research firm and newsletter Cubic Analytics, a bull revival would be confirmed once bitcoin prints a positive “Heikin-Ashi” candle on the monthly chart.