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Is it the bottom for BTC — what the usual indicators are saying?

Andrew Zhoao

News editor

Sep 8, 2022 at 03:41

Bitcoin has fallen again. After $24K in August and swinging around the $20K mark for over a week, the coin has finally broken some support at $19.3K and even dropped below $19K. Many people say that the bottom has been reached, but is this really the case, and what should we expect next? A Reddit user shared his predictions, estimating the situation with the help of special bottom indicators. 

What are indicators and can they predict the future?

Indicators are special tools of technical analysis designed to help traders predict the value of a currency and the direction in which it will go. Technical analysis is based on historical price data and presents it as easy-to-understand indicators. Indicators, in turn, are generated by mathematical methods. They are then transformed into graphical images which are placed on a price chart. In this way, traders can make some decisions.

The accuracy of indicators is not very high. That is, they cannot predict anything for sure. Their aim is rather to help specialists see trends and understand their direction. Thus, the aim of an indicator is to show a trader the possible price behavior but not to give an exact definition of the future.

What do the bottom indicators say?

There are many indicators for analyzing what is happening in the market. Some of them are designed to assess the current value of cryptocurrencies, while others allow you to determine the prospects of price changes. Bottom indicators combine both objectives. That is, they can answer the question of what is happening now, whether the bottom has been reached and where the trend will go next. Many of them have already shown their effectiveness in the past, and below we’ll find out what they are pointing at now.

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The rainbow charts

The indicator uses a simple logarithmic growth curve to predict the potential future price direction of Bitcoin. According to a Reddit user called Beyonderr, the indicator is at the lowest level of the Basically a Fire Sale, and may soon fall lower. The last time this happened was at te peak of the pandemic. In simple terms, it’s Black Friday in the cryptocurrency world, which means an excellent opportunity to buy.

Bitcoin Rainbow Chart
Bitcoin Rainbow Chart

BTC 200 weekly moving average

A clear indicator of the bottom of the bear market. It is based on the last 200 weeks of cryptocurrency activity. Historically, we have never lingered under this indicator; for the first time, it happened only in June 2022.

We can assume that this is a good time to buy.

BTC 200 weekly moving average
BTC 200 weekly moving average

Total market cap 200 weekly moving average

In contrast to previous indicators, it provides forecasts, including altcoins. This is especially useful given that alternative cryptocurrencies have been gaining momentum lately (over 60% of market capitalization). The only downside is that the indicator also shows data on stablecoins. However, according to the chart, everything is fine now.

Total market cap 200 weekly moving average
Total market cap 200 weekly moving average

Pi cycle indicator

It is based on two long-term moving averages and shows the tops and bottoms of Bitcoin. The indicator performed well in picking out cyclical lows, especially in 2015 and 2018. In 2022, it has become active again, showing that the bottom has supposedly been reached.

Pi cycle bottom indicator
Pi cycle bottom indicator

Hash ribbons indicator

This shows times when miners are at a disadvantage. Mostly this happens when the price of Bitcoin is close to the minimum, which allows you to buy on the fall.

According to the author, two weeks ago, the miners got it again. The capitulation lasted 71 days, breaking the record of 2021.

Hash ribbons indicator
Hash ribbons indicator

Puell Multiple indicato

It is calculated by dividing the daily bitcoin issue value by the 365-day moving average of the daily issue value. It is a good indicator for bitcoin as to whether the price is too high and needs to fall (red zone) or whether it is too low and will need a rebound (green zone). Looking at the chart, you can see when the bottom has been reached.

Puell multiple indicator
Puell multiple indicator

MRV Z-score indicator

Determines periods when a BTC is over- or undervalued compared to its “fair value.” The blue line shows the market price, the orange line shows the realized value, and the red line shows the z-score.

The green lines on the chart show that this is a good buying opportunity, but it is possible that the value could still go down. That is, according to this chart, the bottom has not yet been reached.

MRV Z-score indicator
MRV Z-score indicator

Weekly RSI

It measures the rate and magnitude of recent changes in a security’s price in order to assess whether it is over- or under-valued. The chart below shows that we are now in very undervalued conditions. Last week’s indicator was even the lowest on record. Every time we reach oversold values (purple area), BTC reaches the bottom.

BTC weekly RSI
BTC weekly RSI

That’s how things stand at the moment. To sum it up, all indicators don’t tell you for sure if the bottom is reached, but they definitely tell you that this might not be a bad time to buy coins. However, you shouldn’t rely on just one type of indicator, try different ones and choose the ones you think will analyze the situation the best.

Indicators are just one of the many ways to understand what is happening in the market and how to influence it. Along with that, you should also follow industry news, consider a number of metrics like market cap, and stay calm, especially now. This is not financial advice, just certain rules that have developed over time in the industry, so it’s best to do your own research as the right reference point.

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