4 Signals That Bitcoin's Plunge May Bottom Soon

Negative sentiment in the cryptocurrency market has hit lows across the board recently. However, there are several notable signals that could point to a bullish reversal in the near term.

Bitcoin reached an all-time high of nearly $65,000 just over a month ago (April 14, 2021). However, in the past ten or so days, the price has fallen sharply from $50,000, and even fell below $30,000 last Wednesday. Ethereum hit a record high of $4,400 more than ten days ago and fell below $1,800 in recent days. The sentiment among the bears has affected the entire cryptocurrency market, with altcoins suffering more losses.

So where is the bottom of the cryptocurrency that is undergoing a bloodbath? We don't know, but here are a few optimistic signs that might be worth paying attention to.

The turnover of the Shanghai and Shenzhen stock markets exceeded 1 trillion yuan for the fourth consecutive trading day: According to news on October 27, the turnover of the Shanghai and Shenzhen stock markets exceeded 1 trillion yuan for the fourth consecutive trading day. (Golden Ten) [2021/10/27 21:01:40]

The fear and greed index in the cryptocurrency market is now at levels not seen since April 2020, which is around the time when the last crypto market crash occurred, with BTC falling below $4,000, a 50% drop in two days during the pandemic above.

"In hindsight, it was a very good time to buy at that time." Today, Bitcoin has fallen by more than 50% from its high of about $65,000. Is it a benefit in disguise?

Data: The number of Bitcoin Lightning Network nodes is 13704: the current number of Bitcoin Lightning Network nodes is 13704, an increase of 2.97% in the past 30 days; the number of channels is 36966, a decrease of 0.6% in the past 30 days; the network capacity reaches 1056.90 BTC, Up 6% over the past 30 days. [2020/9/6]

Moments when the Fear and Greed Index fell below 15 over the past two years Source: Bluntz

The stock-to-flow (S2F) model suggests that Bitcoin will stage an upward rally around the $30,000 mark given where it is in its cycle.

Bitcoinist: 4 reasons why BTC will increase in value: Bitcoinist published an article to sort out 4 reasons why BTC will increase in value:

1. The BTC blockchain is relatively simple and basic, and with the upgrade of SegWit and Lightning Network, its blockchain efficiency will still be significantly improved;

2. BTC is currently at the center of the financial technology revolution, and the technology market has established a change-driving position in the financial market;

3. The ability of BTC to adapt to the market is enhanced, and the reaction to negative market signals will be reduced. For example, most digital currencies have fallen by double-digit percentages recently, while BTC has fallen by single-digit percentages;

4. Mainstream financial adoption. In 2017, both CME and CBOE launched BTC futures trading. In 2018, more BTC products flooded into the market. For example, Coinbase and Goldman Sachs launched products targeting institutional investors, and Nasdaq cooperated with Gemini to ensure the fidelity of the BTC trading infrastructure of the trading platform. [2018/5/18]

The S2F model is a way to measure the scarcity of assets, and more specifically, commodities such as gold and silver, which is now being applied to Bitcoin. The S2F model treats Bitcoin as a gold-like commodity, so factors such as circulating supply and production speed are considered to determine scarcity and thus price.

The S2F model and 4-year halving cycle have proven reliable in the short-term history of Bitcoin. As PlanB, the creator of the S2F model, puts it: this crash continuing into the next few weeks (actually the end of the bull cycle) will invalidate the S2F model and the 4-year cycle model, which has been correct so far . Many analysts predict that now is not the time for things to get worse. S2F currently has a floor limit of $30,000, which is the current low for this week.

ATH - Lex Moskovski believes that the number of stablecoins on exchanges is at the highest level of the year, "there are many bullets waiting to be seen."

Of course, this could simply be a function of large numbers of investors entering the cryptocurrency ecosystem, but it could well mean that the big players are gearing up for a buying spree.

Furthermore, John Bollinger, creator of the Bollinger Bands indicator, believes that Bitcoin may be close to a double bottom.

All these indicators combined, the market seems to be more reflective of Bitcoin's near-term potential. After an ongoing bearish trend over the past few days, Bitcoin may need to take a breather as the RSI indicator shows that Bitcoin is severely oversold.

Clearly, altcoins have more to worry about – Bitcoin dominance has hit local lows around 40% and has been steadily rising (currently at 47%). As the market sheds excess weight from vaporware tokens fueled by the speculative altcoin mania bubble (note: vaporware is usually aimed at cryptocurrency projects with no clear use case), it is likely that it will recover even more strongly.

Thousands of new tokens, mostly in the form of BEP-20 and ERC-20 tokens, have been created in hopes of emulating the success of older memecoins like Dogecoin. While some of these tokens have reached multi-million dollar market caps, it is clear that tokens of this size are unlikely to last once their lack of fundamental utility is taken into account.

Therefore, it is fair to assume that the smart money has started switching from low-cap altcoins to Bitcoin, the undisputed king of cryptocurrencies after all.

Author | Varun GS

Compile | Beibei

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