Based on a mixture of technical and on-chain indicators, Bitcoin (BTC) could hit an area bottom after falling greater than 35% from its record high of around $126,200 two months ago.
Key Takeaways:
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Momentum, miner capitulation and liquidity indicators suggest selling pressure is easing.
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Macro liquidity suggests that a BTC recovery could begin inside the following 4 to six weeks.
Bitcoin sellers are approaching exhaustion
In December, Bitcoin's weekly stochastic RSI had risen from oversold levels, a situation that has occurred near key turning points previously, before price rebounded, as trader Jesse highlights within the chart below.
BTC/USD weekly chart. Source: TradingView/Jelle
Similar bullish crosses occurred in early 2019 (after BTC bottomed around $3,200), March 2020 (the COVID crash low around $3,800), and late 2022 (across the cycle low of $15,500). In each case, the momentum modified first while the worth lagged behind.
In addition to the signal, Bitcoin's three-day chart shows a bullish divergence where the worth made a lower low but momentum didn’t.
BTC/USD three-day chart. Source: TradingView/Jelle
This pattern also occurred before the mid-2021 correction low and the FTX-driven low in 2022, each of which preceded multi-month recoveries.
These signals suggest that selling pressure within the Bitcoin market could also be exhausted within the near term, a condition more typical of market bottoms than temporary recovery rallies.
The capitulation of Bitcoin miners shows that BTC has bottomed out
Bitcoin's hash rate fell 4% within the month ended Dec. 15, a development that VanEck analysts Matt Sigel and Patrick Bush viewed as “a bullish contrarian signal” related to miner capitulation.
They said that periods of sustained hashrate compression have historically preceded stronger Bitcoin returns, explaining that since 2014, BTC has achieved positive 90-day returns 65% of the time after a 30-day hashrate decline.
Average Bitcoin hash rate in comparison with price. Source: Glassnode
The signal strengthened over longer periods with positive 180-day returns 77% of the time and a mean gain of 72%.
Rising prices could also improve miners' profitability and convey ancillary capability back online.
A macro indicator shows that Bitcoin could rise again in 4 to six weeks
Bitcoin could also be nearing a bottom as liquidity conditions begin to enhance, an element that has led to large BTC reversals previously.
Analyst Miad Kasravi's backtest of 105 indicators showed that the National Financial Conditions Index (NFCI) peak is usually 4 to 6 weeks ahead of a Bitcoin rally.
This signal appeared in late 2022 and mid-2024, each before strong rallies. Historically, every 0.10 point decline has been accompanied by a rise of around 15-20% in Bitcoin, with lower NFCI values marking longer BTC uptrend phases.
NFCI index vs Bitcoin price. Source: X
In December, the NFCI was at -0.52 and trending downward.
NFCI index vs Bitcoin price. Source: X
One potential catalyst is the Federal Reserve's plan to convert mortgage-backed securities into Treasury bonds, a move Kasravi likens to the “non-QE” liquidity injection in 2019 that preceded a 40% Bitcoin rally.
Despite these signals, many market observers expect the Bitcoin price to say no further, with their price targets ranging between $70,000 and $25,000.
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This article doesn’t contain any investment advice or recommendations. Every investment and trading activity involves risks and readers should conduct their very own research when making their decision. While we try to offer accurate and up-to-date information, Cointelegraph doesn’t guarantee the accuracy, completeness or reliability of the knowledge in this text. This article may contain forward-looking statements which can be subject to risks and uncertainties. Cointelegraph is not going to be accountable for any loss or damage arising out of your reliance on this information.
