Bitcoin bulls continue to feel frustrated, as the price of each coin is constantly dropping to its lowest levels for what it looks like Unlimited amount of time. However, a bottom could form, according to an index that reached historic lows not seen since the bottom of the 2015 bear market.
What followed the last mention was 10,000% returns and Bitcoin became a household name forever. While such returns are not likely for the second time, oversold conditions could lead to a significant and unexpected rally. Here is a closer look at the 3-day stochastic on BTCUSD price charts.
Stochastic oscillator explained
The Stochastic Oscillator is a range-bound momentum indicator that uses support and resistance levels, created by investment expert George Lane in the 1950s. to me Wikipedia“Stochastic refers to the current price point relative to the price range over a period of time. This method attempts to predict price turning points by comparing the closing price of a security to its price range.”
The formula provides the price of the asset expressed as a percentage of the price range between 0% and 100%. The goal of the Stochastic – often called the Stoch for short – is to determine when prices are closing near the extremes of the last range. It is at this point that reversals are likely to occur. Simply put, the lower the reading, the higher the likelihood of a rebound. The higher the reading, the higher the potential for rejection due to overbought conditions.
BTCUSD saw 10,000%+ ROI following the low | Source: BTCUSD on TradingView.com
Bitcoin bulls are trying to hit bottom
Currently, the price of Bitcoin on the 3-day timeframes is at the lowest point in its entire history. The only other time it was lower, was at the bottom of a bear market of 2015. A second bottom followed in the following months, followed by a 10,000% price rally. From below $200 per BTC, the top cryptocurrency has jumped to nearly $20,000. Cryptography was put on the map forever after – What happens this time?
For now, the bulls are not out of the woods. The stochastic oscillator consists of a fast stochastic (%K) and a slow stochastic (%D). A signal to take action is triggered at the intersection of these two lines. Bears are on their way to defend the bull’s cross for 3 days, while the bulls strive to set the bottom once and for all.
The bullish crossover hasn't yet been completed | Source: BTCUSD on TradingView.com
Both stochastics and RSI are used to indicate overbought and oversold. The two tools differ in that the RSI measures price velocity, while the Stoch is based on the percentage of the trading range formula. to me InvestopediaStochastic is more effective for sideways market – exactly what cryptocurrency traders are suffer painfully right Now.
Related reading | Time vs. Price: Why This Bitcoin Correction Was the Most Painful So Far
During highly volatile conditions, Stoch can generate false signals. However, it is difficult to ignore the Bitcoin oversold signal for only the second time ever, when the previous one provided such profitable results. What will this signal produce this time?
– Tony “The Bull” Spilotro (@tonyspilotroBTC) May 3, 2022
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Featured image from iStockPhoto, Charts from TradingView.com