The price of bitcoin has declined over the past several months, resulting in its worst quarterly close since 2011. The bearish momentum has been brutal as the crippling transition spread across the cryptocurrency market.
However, bearish momentum is beginning to weaken on the weekly time frame, giving the bulls the first opportunity to capitalize in a while.
Bitcoin Bearish Weekly Momentum Begins To Weak, Can The Bulls Capitalize On It?
In the real world, momentum is a measure of velocity and mass. In finance, the term describes the rate of speed at which the price of an asset changes. Considering that the price of bitcoin has dropped from $60,000 to $20,000 in six months, bearish momentum should be considered.
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However, on the weekly time frame, the first signs of a reduction in bearish momentum have been observed.
Bearish momentum is weakening according to the LMACD histogram | Source: BTCUSD on TradingView.com
On the MACD histogram, bearish momentum is weakening as can be seen with the histogram changing from red to pink.
The current situation is no clear sign. Momentum is considered bullish only when the histogram turns green through the zero line.
A green signal isn't always a worthwhile buy | Source: BTCUSD on TradingView.com
As the chart above shows, turning green does not always confirm a significant reversal. Then why would the bulls want to consider the current system? As the saying goes, “When in doubt, zoom out.”
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Zooming out, the reduction in bearish weekly momentum becomes more significant when you consider the level at which the momentum is changing. The weekly MACD is currently giving a reading of -0.20. The bottom of the previous bear market came in a fraction below a point at -0.21.
Momentum is turning where past bottoms have been put in | Source: BTCUSD on TradingView.com
This is still no guarantee that the bulls will regain the upper hand. However, could the third floor turn out to be the lucrative crypto holders expected at this stage? Bulls will need to capitalize on potential momentum changes, and follow through pushing the histogram into the green.
A retest of $29,000 would be a strong first step, but given the potential for further downturns, investors will need to be more confident on a return of $50,000 or more.
If the bearish momentum returns before the end of the week and the histogram pushes into the red, the bulls may forget about the rally for a while.
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Featured image from iStockPhoto, Charts from TradingView.com