Bitcoin prices recently slid below the technically important $6,000 level, but subsequently popped back above that level, igniting speculation that a buying opportunity is afoot in the largest cryptocurrency.
The leading digital currency has fallen as of late, particularly when news broke that the US Securities and Exchange Commission is postponing their decision on a bitcoin ETF filed by investment firm VanEck and blockchain technology company SolidX.
“The suffering has been even worse for much of the altcoin market, some of which have been bleeding out to new yearly lows and seeing drops between 2–15 percent,” reports CoinDesk. “Major cryptocurrencies such as ether and XRP dropped by 2.95 and 9.6 percent respectively, before the world’s largest cryptocurrency by market capitalization took an about-turn, stabilizing prices and reversing some of the damage from Tuesday’s chaos.”
Is The Rally Credible?
As of mid-day Wednesday, bitcoin was flirting with the $6,600 area and seven of the 10 largest digital currencies by market value were sporting double-digit intraday gains.
Perhaps not surprisingly, momentum plays an important role in when to buy bitcoin, but what may be surprising is that buying the cryptocurrency after it has experienced big rallies can be a winning strategy.
“Glaring out on the daily chart, the relative strength index (RSI), used to judge the momentum of a trend, has formed a bullish divergence (Aug. 8–14), whereby prices moved lower, but the RSI moved higher creating a ‘divergence’ from the current bearish setup,” according to CoinDesk.
A poll conducted by Gallup-Wells Fargo revealed that 72% of U.S. investors have no interest in ever buying Bitcoin, while 2% currently own the cryptocurrency and 26% are on the fence.
“A monthly low slightly higher than the yearly low of $5,755 reveals the bears are becoming exhausted in their attempt to drive down prices with declining volume apparent since the middle of May,” reports CoinDesk. “It is also worth noting that the monthly RSI is at its lowest since October 1, 2015 – a level that may have potential to trigger a buying frenzy, reversing the bearish trend seen since Jan 1. A drop below recent monthly lows would expose bitcoin to the yearly low of $5,755 as it fails to cement a higher high.”
For more information on the cryptocurrency market, visit the Bitcoin category.