Bitcoin indicator hits historic low not seen since 2015


Bitcoin bulls remain demoralized as the price per coin has continuously grinded to lows for what feels like an infinite amount of time. However, a bottom could be forming, according to an indicator that has reached an all-time low since the bear market bottomed in 2015.

What followed the last signal was a return of 10,000% and Bitcoin became a household name forever. While such returns are unlikely to be a second time around, such oversold conditions can provide a significant, unexpected benefit. Here’s a closer look at the 3-day Stochastic on BTCUSD price charts.

The stochastic oscillator explained

The Stochastic Oscillator is a range-bound momentum indicator that uses support and resistance levels created by investment educator George Lane in the 1950s. According to WikipediaThe term stochastic refers to the point of a current price in relation to its price range over a period of time. This method attempts to predict price turning points by comparing a security’s closing price to its price range.

Related literature | Bitcoin perfectly follows the market cycle equation, what comes next for Crypto?

The formula gives the price of an asset, expressed as a percentage of its price range, between 0% and 100%. The purpose of the Stochastic – often referred to as Stoch for short – is to see when prices are getting close to the extremes of a recent range. It is at this point where reversals are most likely to occur. Simply put, the lower the value, the more oversold and the greater the chance of a bounce. The higher the value, the higher the chance of a rejection due to overbought conditions.

BTCUSD saw 10,000%+ ROI after the low | Source: BTCUSD on TradingView.com

Bitcoin Bulls Trying to Hit a Bottom

Currently, the Bitcoin price on 3-day timeframes is at its lowest point in its entire history. The only other time it was this low was at the bottom of the 2015 bear market. A second low followed in the months that followed, followed by price increases of over 10,000%. From a low of less than $200 per BTC, the top cryptocurrency rocketed to nearly $20,000. Crypto Was Put On The Map Forever – 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). When these two lines intersect, a signal is given to take action. Bears are busy defending a three-day bull cross, while bulls try to lay a bottom once and for all.

The bullish crossover is not yet complete | Source: BTCUSD on TradingView.com

Both the Stochastic and the RSI are used to signal overbought and oversold conditions. The two instruments differ in that the RSI measures the price speed while Stoch relies on the percentage of a trading range formula. According to InvestopediaStochastic is more effective for a sideways market – exactly what crypto traders are painfully experiencing right now.

Related literature | Time vs Price: Why This Bitcoin Correction Was the Most Painful Yet?

During highly volatile conditions, the Stoch can generate false signals. However, it is hard to ignore a historic oversold signal in Bitcoin for the second time ever, when the previous precedent delivered such profitable results. What will this signal produce this time?

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Featured image from iStockPhoto, charts from TradingView.com



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