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Shaky week as Bitcoin tumbles but fundamentals remain strong
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It’s been an interesting few days in crypto to say the least. Earlier this week, Bitcoin plunged through key support levels at USD6,000 and USD5,800 before finding a temporary support in the USD5,250 area.
Looking at price action on the 1-hour chart from the past week suggests that Bitcoin has completed a 5-wave impulse move to the downside followed by a 3-wave corrective trend to the upside. This is further corroborated by a significant bullish RSI divergence (downtrend on price, uptrend on RSI) as shown by the red line.
At the time of this writing, BTC’s 3-wave corrective move seems to have terminated at the 0.382 fibonacci level. This indicates a rather shallow pullback and suggests that market sentiment is leaning towards bearish at the moment. If the C wave of this particular structure manages to retrace up to the 0.618 level (USD5,875), that could be a sign of a trend reversal.
XRP looks bullish
XRP’s chart tells a different story. Unlike BTC, XRP has managed to retrace past the 0.618 fibonacci level before being rejected at the 0.786 level at USD0.48. This is significant considering Bitcoin’s relative bearishness.
While it’s uncertain why XRP seems to have underlying bullishness at the moment, it may be due to Ripple’s recent partnership announcement with Malaysia’s CIMB, or perhaps FOMO from XRP’s “flippening” with ETH for the number two spot in the global cryptocurrency rankings. In either case, XRP with it’s extended volatility is definitely a coin to keep an eye on over the next week.
It’s easy to get caught up in tunnel vision after big moves like the one we just saw, so let’s zoom out for a bit. Here’s a BTC/USD chart on the daily timeframe.
The green circles show past points in BTC’s history where RSI fell below 30 on the daily chart. Notice how BTC has always made large moves to the upside following a dip below RSI 30. Now take a look at where Bitcoin’s RSI is currently sitting – it’s literally never dipped this low anytime in the past year on the daily chart.
At the moment, BTC is extremely oversold. The drastic slope of the RSI dip also suggests that thin order books and low volume was a contributing factor to the relatively low magnitude of this price fall.
From a fundamental analysis perspective, Bitcoin has never been stronger or more “accepted” on a global level. With huge financial institutions like ICE and Fidelity on the brink of entering the space, this timely dip is not the end of Bitcoin as we know it.