This Bearish Setup Could Challenge Bitcoin’s Bottom Theory

Summary: Bitcoin's price is struggling to overcome the $88,100 mark, currently trading near $87,700. Despite a brief bounce from $80,500 that raised expectations of a bottom, emerging indicators suggest that this low may be tested again or potentially breached. Both chart patterns and on-chain data indicate a continued risk for further declines.

Key Takeaways:

Bitcoin is currently below $88,100, with a potential retest of recent lows looming.
A hidden bearish divergence in the Relative Strength Index (RSI) indicates ongoing selling pressure.
A bearish crossover in the exponential moving averages (EMAs) could signal a weakening trend.
Whale activity shows a reduction in Bitcoin holdings, adding bearish sentiment.
Key price levels to monitor include $88,100 for potential upward movement and $80,500 as a crucial support level.

Warning Signals in Bitcoin’s Performance

Bitcoin's price has failed to convincingly surpass the $88,100 level and is trading around $87,700, remaining nearly unchanged for the day, but showing a decline of over 3% for the week. The recent recovery from $80,500 provided traders with optimism about a possible bottom. However, new signals suggest that this bottom might be retested or even broken.

The chart analysis and on-chain data both indicate similar risks: the current recovery may not be as robust as hoped.

Indicators of a Downtrend Remain

One significant issue arises from the Relative Strength Index (RSI), a metric that monitors market momentum. Between November 18 and November 24, Bitcoin created a lower high, while the RSI produced a higher high. This hidden bearish divergence is typically seen within a downtrend and tends to support the continuation of that trend, rather than a reversal.

Hidden Bearish Divergence For BTC: TradingView

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This phenomenon dovetails with the overarching downtrend that commenced in early October. Should the current divergence materialize, it could signal another decline that revisits recent lows.

A second red flag emerges from the behavior of the exponential moving averages (EMAs). EMAs, which prioritize recent price data, are more responsive to trend shifts. The 100-day EMA is nearly crossing the 200-day EMA, hinting at a bearish crossover. Such a crossover typically indicates a weakening trend structure.

Bearish Crossover Looms: TradingView

The fact that this crossover is developing near the $88,100 resistance heightens this area’s significance. If this crossover is confirmed while Bitcoin’s price remains below that level, the potential for recovery diminishes.

Influence of Whale Activity on Market Sentiment

On-chain metrics reinforce this cautious outlook. Wallets holding between 1,000 to 10,000 BTC have been decreasing their holdings since November 16, with the count dropping from 1,984 wallets to 1,962 as of November 25.

This decline mirrors previous whale activity earlier in the month, where a drop in wallet counts coincided with Bitcoin's near 8% fall from November 1 to November 5.

Whales Dumping: Glassnode

The same pattern seems to be occurring again, but this time, the price is closer to its recent low. If whale activity continues to wane amidst bearish chart indicators, Bitcoin’s bottom theory may find itself in precarious territory.

Crucial Price Levels for Bitcoin

Bitcoin must achieve a clean daily close above $88,100 to mitigate the current divergence, interrupt the EMA compression, and regain short-term bullish momentum. A significant movement above that level could pave the way to $93,800, or even $107,400, should buying momentum strengthen. However, these higher targets seem unlikely under the current bearish conditions.

Bitcoin Price Analysis: TradingView

On the downside, $80,500 represents a pivotal support level. A drop below this threshold would confirm an 8.32% decline from current prices, similar to the whale-driven drop observed in early November. Such a move would further suggest that the previous low might not have been a true bottom, potentially extending Bitcoin's bottoming process into the future. While Bitcoin has pulled back from its lows, the bearish setup remains evident.