Analysis

When the Bitcoin price hits its bottom, here’s how you can take advantage of it

Bitcoin has been a disappointment to many in the crypto industry so far. The crypto king has had a pretty poor performance in terms of price action over the past 2 months.

But it’s time for Bitcoin to regain its glory.

Admittedly, there aren’t many signs of a major rally as of now, but there are some early signs of a recovery.

BTC/USDT | Source: Trade View

From a technical perspective, Bitcoin is recovering somewhat from the lows and breaking the 50-day moving average (MA) critical resistance. Even the RSI is showing good momentum at the time of writing. However, it is still trading below the 200-day MA. This implies that the long-term uptrend has not returned to the market.

To eliminate all restraining bears, the price needs to break above both the 200 DMA and the second resistance area at $52,000-54,000.

On-chain indicators also seem positive for bitcoin as the NVT ratio remains intact despite the recent days price rally. This represents a bullish buying opportunity in a situation where BTC is undervalued. At the same time, the coin can generate good returns if general market sentiment recovers in the future.

NVT Rate | Source: Santiment

In addition to the NVT Ratio, the corrected DAA price divergence is also sending buy signals everywhere. Therefore create a good buying opportunity.

Deviations DAA-Price adjusted | Source: Santiment

The Puell Multiple of Bitcoin is also currently pointing to an attractive value proposition. The ratio is still below 1 even though the price has recovered from local lows. This mainly represents a good risk-on-reward scenario.

Drag multiple | Source: Glassnode

However, it seems unwise to buy Bitcoin now. Oddly enough, there are a few worrying signals to watch out for. Bitcoin options data review by Coinoptionstrackit is quite clear to see that a price drop is imminent.

Bitcoin options chain | Source: Coinoptions track

At the time of writing, Bitcoin is trading around $42,432. The chart above clearly shows the maximum drop around $41,000. Therefore, the potential drop will not be too deep. Also, long contracts are heavily concentrated at $40,000 and $42,000, well below the maximum decline.

Accordingly, there are 2 possible cases. If the professional options trader bets a lot of money, the price can drop to $40,000. Conversely, if they post a loss and liquidate their positions, the short will push the price higher. Open interest at $43,000 may support bullish traders at this time. This suggests that a near-term bearish bias is possible but does not affect the overall structure and sentiment.

Interestingly, from an investor perspective, there may be a good BTC buying opportunity. However, in this case it is advisable to be partial when placing a buy order, as the possibility of a fall cannot be completely ruled out. Buying dip will be the best way in the future.

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Annie

Championing positive change through finance, I've dedicated over eight years to sustainability and environmental journalism. My passion lies in uncovering companies that make a real difference in the world and guiding investors towards them. My expertise lies in navigating the world of sustainable investing, analyzing ESG (Environmental, Social, and Governance) criteria, and exploring the exciting field of impact investing. "Invest in a better future," I often say. That's the driving force behind my work at Coincu – to empower readers with knowledge and insights to make investment decisions that create a positive impact.

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