For the past several days, Bitcoin bulls have been defending $4,000, which is increasingly becoming a level of support for the cryptocurrency. Despite this, it has not yet built up enough buying pressure to propel its price beyond the low-$4,000 range.
Now, one widely used technical indicator is signaling that Bitcoin could be reaching an inflection point that will lead to a massive price movement.
Bitcoin on the Brink of a Large Move
A recent report from Bloomberg details that Bitcoin is close to making a large price move based on the widely used GTI VERA Bands Indicator, which uses trend data over any time frame to give investors insight into which direction an asset is poised to move. This indicator also claims that Bitcoin is currently in its longest buying trend since September.
This indicator is now seeing a drastic narrowing of its upper and lower bands, which typically precedes a large price swing. This, coupled with the recent buying trend that Bitcoin has been in, may signal that it will see a significant increase in buying volume in the near future.
Another widely used indicator, called the Directional Movement Index (DMI), also recently flashed a buy signal for Bitcoin, which is based on the strength and momentum of buying and selling trends.
The DMI separates price movements into either a positive or negative directional movement category, which is used by traders to quantify the strength of a particular trend. Earlier this week, the DMI flipped positive for Bitcoin for the first time in several months, signaling that Bitcoin’s “very strong” selling pressure had largely subsided, and buying volume is gradually increasing.
What Analysts Think About Bitcoin’s Price Action
Only time will tell as to whether or not these indicators are correct in assuming that Bitcoin’s price will soon rise, and analysts have mixed opinions regarding this data.
While speaking to Bloomberg about the DMI flipping positive, Mati Greenspan, senior market analyst at eToro, said that in order for a truly bullish case to be made for Bitcoin, it needs to decisively surge above $5,000.
“In technical analysis this makes these levels very strong. But I think only once we see a strong break above 5,000, 6,000, if we get above 7,500, that’s when people start to turn really bullish,” Greenspan noted.
Travis Sling, the founder of Ikigai, a cryptocurrency hedge fund, remains cautious regarding any bullish price indicators for the cryptocurrency markets, noting that he believes that the markets will still see lower lows in the future before moving much higher.
“It’s unlikely that the bottom is in for Bitcoin. I am certainly willing to change my mind, but the preponderance of evidence leads us to believe that we’ll see more lows before we head higher.”
As traders patiently wait to see how Bitcoin responds to trading above $4,000, the validity of these historically accurate indicators will remain in question.
Featured image from Shutterstock.
