Bitcoin has experienced a strong drop in the past 48 hours after a strong rally to start the week. The leading cryptocurrency now changes hands for $10,300 after it underwent a strong $2,000 correction that brought it as low as $9,990 on Friday morning.
There are crucial reasons why the cryptocurrency could soon undergo a strong bounce.
Traders are critically eyeing the $10,500 as we head into the weekly close due to that level’s macro importance to BTC’s price action. Bitcoin should bounce soon if it is to maintain its medium-term uptrend.
Why Bitcoin Could Soon Bounce
First and foremost, Bitcoin is extremely oversold, with the severity of this drop reminding many of the March crash. One trader shared the chart below, which suggests that BTC hasn’t been this technically oversold since March’s black swan crash:
“Alright, stopped out on both $BTC & $ETH trades (of course). It think this is just one of those times when I have to admit defeat. By the way: the RSI hasn’t been this oversold since the black swan crash. Crazy stuff.”
Chart of BTC’s price action since the start of 2020 with RSi analysis by crypto trader Byzantine General (@Byzgeneral on Twitter). Chart from TradingView.com
Secondly, one trader’s proprietary indicator that last printed a “buy” signal 100 days ago has once again been triggered.
The final reason why Bitcoin could bounce is the price of gold is expected to continue higher in the longer run.
Rick Rule, the CEO of Sprott U.S. Holdings, told Kitco on September 3rd that gold is poised to move higher in the long run due to low interest rates. As gold is correlated with BTC, any bounce in the precious metal should translate well to Bitcoin.
Bulls Remain Optimistic in the Longer Run
Bulls remain optimistic in the longer run.
Real Vision CEO Raoul Pal, a Wall Street veteran, shared the message below during the drop lower, explaining he remains optimistic:
“In the post-Halving bull cycles, bitcoin can often correct 25% (even 40% + in 2017), throwing off the short-term traders (or giving swing traders a shot at the short side). Each of those was a buying opportunity. DCA opportunity ahead?”
He previously stated that BTC is poised to rally exponentially this cycle due to macro factors:
“Most people don’t understand the latter but is simply put, Powell has shown that there is ZERO tolerance for deflation so they will do ANYTHING to stop it, and that is good for the two hardest assets – Gold and Bitcoin. Powell WANTS inflation.”
Other bulls include Arthur Hayes of BitMEX, Mike Novogratz, and Dan Tapiero.
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