Bitcoin price (BTC) has continued to fend off support in the $7,800 region for what will be the fifth week running at the end of today.
With the BTC price currently back up over $8,200, several indicators suggest that a potential reversal may be in the cards.
Weekly Crypto Market Performance. Source: Coin360.com
1. Bitcoin price support holds again
Bitcoin price seems to have found a bottom for the time being. Both on the daily and weekly charts the BTC/USD has repeatedly rejected support this past week. After the high of around $8,400 on Monday, Oct. 14, Bitcoin bounced off Bollinger Bands (BB) indicator’s support 5 days out of 7, with the current support sitting around $7,860.
As the price of Bitcoin has been ranging at the bottom half of the Bollinger Bands this past week, it’s caused the BB lines to tighten, which has brought down the resistance on the Daily BTC/USD chart to just $8,550 as well as the moving average down to $8,120.
Next week, Bitcoin bulls will need to see the price maintain its trend above $8,120 to break out of the current downtrend, and a break above $8,550 would lead us towards our next level of resistance on the weekly Bitcoin chart.
BTC/USD 1-day chart. Source: TradingView
Bitcoin weekly outlook
Due to the downward price action for Bitcoin this past week, the BB indicator support has extended down slightly to $7,633, which is the level Bitcoin needs to hold before the bears start chanting for blood.
Just yesterday, gold bug Peter Schiff sent a tweet outlining his prediction for Bitcoin price to fall to $2,000. He said:
“The Bitcoin chart looks horrible. Not only does the flag that followed the recent breakdown project a move to $6K, but we are close to completing the right shoulder of a head and shoulders top, with a $14K head, and neck line just below $8K, that projects a collapse to below $2K!”
Next week will see the fifth weekly candle form in the lower part of the Bollinger Bands. But as can be seen on the charts, the candles are getting smaller by the week. Could this week be the turning point for Bitcoin? A look at the Relative Strength Index (RSI) might provide some insight.
BTC/USD 1-week chart. Source: TradingView
2. Relative Strength Index (RSI) looks oversold
The weekly Relative Strength Index (RSI) isn’t showing us much. However, the RSI on the daily chart is hinting that Bitcoin might be ready for a bullish reversal after it seemingly bottomed at 30.75 on Oct. 19 and has started to regain an upward trajectory.
It may be too early for Bitcoin bulls to start cheering, but that hasn’t stopped Morgan Creek Digital co-founder Jason Williams from tweeting the popular PlanB medium post about scarcity and Stock-to-Flow today with the following comment:
“The model predicts a bitcoin market value of $1trn after next halving in May 2020, which translates in a bitcoin price of $55,000.” ~ PlanB
Halving is in 206 days”
BTC/USD 1-day chart. Source: TradingView
3. Bitcoin Moving Average Convergence (MACD)
Another indicator that is showing early signs of recovery on the Bitcoin daily chart is the Moving Average Convergence Divergence (MACD), which today started to open up away from the signal line.
The recent Bitcoin price action has also led a dark green bar on the MACD histogram after 8 days of showing a bearish pattern. However, these are very early indicators of a bullish reversal for Bitcoin, as the weekly MACD is still bearish.
BTC/USD 1-day chart. Source: TradingView
The weekly MACD for Bitcoin
Moving up to the weekly timeframe with the Moving Average Divergence Convergence, we can see little has changed after the 8th candle on the histogram formed in dark red. However, the tighter range and a close above $8150 this week might print a pale pink candle, and with it, some hope of a reversal can start to look likely.
That being said, the signal line and MACD line are not yet showing any signs of a bullish cross, and until they begin to change trajectory there is still the potential of more downside to come.
BTC/USD 1-week chart. Source: TradingView
4. Bitcoin mining profitability approaches yearly low
The prospect of a possible reversal will be welcomed by Bitcoin miners, who have been facing low profitability at levels we haven’t seen since Bitcoin was trading around $3,500 in February of this year.
At the same time, this could actually provide another bullish indicator, i.e. miners are natural market sellers.
In theory, as BTC approaches breakeven price for miners, these natural sellers have the incentive to hold on to their inventory to reduce market sell pressure.
In fact, at the current price levels, only miners that are paying less than 10 cents per kWh can currently mine Bitcoin without a loss.
Even mining giants like Bitmain who benefit from low industrial electricity rates of around 0.06 cents per kWh will be getting twitchy right now, as another move down for Bitcoin could spell financial ruin for Chinese Bitcoin miners, who are estimated to control 60% of the hash rate.
Cointelegraph asked Bitcoin mining entrepreneur Amir Ness: at what price Bitcoin would need to fall to for his mining farm to become unprofitable?
Ness operates the Mine-A-Block co-mining facility in Irkutsk, Siberia, which benefits from electricity costs of just 0.055c per kWh.
He answered that even at 0.055c per kWh, Bitcoin Price would need to stay above $6,500 to avoid mining at a loss.
Bitcoin Mining Profitability: 1-year chart. Source: BitInfoCharts
Bullish scenario
For the bears to relinquish their hold, Bitcoin will need to maintain its position above the daily moving average on the Bollinger Bands’ indicator, which currently sits at $8,120. Closing above the MA will put the next targets of resistance to watch out for at $8,550.
The next level of resistance from here will be around $9,846 and should Bitcoin price break and hold this level, then Bitcoin has a free run up to $12,100.
Bearish scenario
Today’s rally from $8,000 to $8,170 is bad news for the bears, however, to keep things in perspective the Bitcoin price is still only $300 above the current support on the daily Bollinger Bands.
If Bitcoin extends below $7,860, it will encounter its next level of support around $200 lower. Should this happen, then the next stop is around $7,000 which would represent a massive 15% drop from the current price. This could cause a wider selloff pushing BTC to levels that will force miners to switch off or mine at a loss.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.