John Bollinger, a renowned technical analyst, sees a potential “W-bottom” forming in Bitcoin’s price chart. But what does that mean, and should you be excited?
What’s a W-Bottom?
A W-bottom is a chart pattern showing two consecutive dips in price, followed by a potential rebound. Think of the letter “W”—that’s the shape the price action makes on the graph. Bollinger spotted this pattern in the Bitcoin/USD (BTC/USD) pair.
Bitcoin’s Recent Dip and Potential Support
Bitcoin’s price has been on a rollercoaster ride, peaking near $110,000 in mid-January and then falling. It seems to have found some support around $74,000, forming those crucial two dips in the W-bottom pattern. The lower band of the Bollinger Bands sits around $77,138, suggesting this support level might hold.
Is This the Bottom? Not Yet, Says Bollinger
Bollinger himself emphasizes that this is just a potential W-bottom. Confirmation is needed. Specifically, Bitcoin needs to break above the previous swing high, around $90,000, with strong trading volume. This would signal a genuine shift in momentum.
Other Signs of a Potential Reversal
There are other clues suggesting a potential bottom:
- Lower trading volume: The intense selling pressure seems to be easing.
- Momentum oscillator: This indicator, which tracks overbought and oversold conditions, is also showing signs of bottoming out. However, a convincing move above its midpoint would be a stronger confirmation signal.
Bollinger Bands and Volatility
Bollinger Bands, Bollinger’s own invention, show market volatility. Wide bands mean high volatility, while narrow bands mean low volatility. Bitcoin’s bands have remained relatively wide, reflecting its wild price swings over the past couple of years.
The Bottom Line
While the W-bottom pattern is promising for Bitcoin bulls, it’s crucial to remember that it’s not confirmed yet. A decisive break above $90,000 with strong volume is needed to validate this pattern and signal a potential bullish reversal. Until then, it’s just a possibility. At the time of writing, Bitcoin was trading around $81,366.
