A recent spike in Bitcoin (BTC) price after a nerve-wracking drop below $ 30,000 this Tuesday has activated the bullish prospects of a classic financial model for the cryptocurrency.
The model known as the Wyckoff Method – developed by Richard Wyckoff in 1888 – seeks to control financial market trends based on the relationship between the supply and demand of assets. The method has two measurements: accumulation and distribution.
In an accumulation setup, an asset signals that it is bottoming out after a major drop in price. Eventually this will cause the price to recover to the upside. Meanwhile, the distribution setup sees the asset peak after a solid price moves up. After that, the price reverses downward direction.
Each setup has five unique phases. For example, in distribution, an asset goes through the following events in the named phases (in order): Preparatory Supply (PSY), Buy Peak (BC), Automatic Response (AR), Secondary Test, Signs of Weakness (SOW), Last Point of Supply (LPSY) and Upthrust After Distribution (UTAD).
Meanwhile, an asset in the accumulation scheme logs the following events in its five phases (in sequence): Preliminary Support (PS), Selling Climax (SC), Automatic Rally (AR), Secondary Test (ST), Last Point of Support (LPS) and Token of strength.
Wyckoff confirms Bitcoin accumulation
Comparing recent Bitcoin price movements and the events depicted in the Wyckoff accumulation scheme, it appears that the cryptocurrency is struggling with its last phase C base.
Phase A in the graph above shows the exhaustion of the previous downward momentum in the Secondary Test (between $ 28.8,000 and $ 30,000) and in the Selling Climax (approximately $ 34,000). Up to this point in time, the offer based on the Wyckoff method was dominant.
In Phase B, an automatic rally (AR) was approaching, led by both institutional demand for Bitcoin and short coverage. Later the price dropped repeatedly towards secondary testing and recovered from Phase A after testing the horizontal Selling Climax line.
Now the Bitcoin price has entered phase C and leaves it to “smart money” to decide whether the cryptocurrency is ready to rise higher. An upward confirmation would come as the ongoing rebound beyond the SC-ST phase accompanied by stronger volumes.
Phase D and Phase E reflect a major recovery run towards $ 60,000.
“It seems like a possibility,” said market analyst Kevin Swenson. “We have just hit the bottom low of $ 28.8,000 … If this model works, we will now be entering the final stage of the recovery.”
In terms of the Wyckoff Method, this lower low of $ 28.8,000 is very similar to the higher high of $ 65,000. Both have a maximum emotional impact on market participants. “
Meanwhile, Bloomberg Intelligence’s chief commodities strategist Mike McGlone, although not referring to the Wyckoff method, noted that repeated bullish rejections near $ 30,000 are similar to Bitcoin of $ 4,000 in 2019-2020 ricocheted.
“Selling bitcoin with good support and similar dips among most means about $ 30,000 this year didn’t end well,” he added, “and if the key question this time is whether it’s any different, we’ll see a more permanent one Bull market. “
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