The crypto market crash on July 5 triggered a liquidation event comparable to that of the FTX-induced crash in 2022. But the question that has remained in everyone’s minds – is bitcoin bottom in?
Why Did Crypto Crash And Will It Recover?
Before we proceed, it is important to understand why the crypto market crashed. As discussed in a previous article, there are a multitude of factors that played a role in triggering such a crash:
- German government selling BTCs.
- Mt. Gox payouts adding selling pressure.
- Bitcoin’s weak market structure and lack of positive developments.
- Bitcoin miners selling.
- Losing correlation with the rallying stock market.
- Fed’s hawkish stance.
- Derivative liquidations cascade, leading to a further drop.
Despite a bloodbath on July 5 in the Asian & European trading sessions, the US session saw a lot of buyers step in. This en mass buying has triggered the crypto market to kickstart a rally, especially altcoins and meme coins. As a result, traders are wondering if the bitcoin bottom is in.
Related: Six Reasons Behind Crypto Market Crash Today: A $1 Billion Meltdown
Is Bitcoin Bottom In?
BTC’s Daily RSI Suggests, Bottom Could Be In
To simply answer the question “is Bitcoin bottom in?” the simple answer would be a yes. The Relative Strength Index (RSI) and the extent of the July 5 liquidation event are two supporting factors.
Let’s understand that the RSI, although a simple and popular tool, can be extremely powerful if used right. To recap, our previous Bitcoin’s bottom signal article showcased how the RSI on the daily chart had slipped into the oversold zone level, flashing a buy signal.
The last three times the RSI dipped below the oversold level of 30, Bitcoin price kickstarted a massive rally.
- November 9, 2022: RSI hit 24.43, BTC price rallied 60.11%.
- March 10, 2023: RSI dropped to 28.23, BTC price surged 62.54%.
- August 18, 2023: RSI plummeted to 18.45, BTC price shot up by 197.77%.
- June 24: RSI hit 25.78 and briefly recovered to 44, but due to the July 5 crash, RSI slipped below the oversold level and has hit 27.50 as of July 6.
History does not repeat, but it often rhymes. So investor should be on the lookout for a potential reversal as shown in the below Bitcoin price chart.
Crypto Liquidation Event Suggests Bitcoin Bottom Could Be Near
As seen in the crypto market liquidations chart, the July 5 event is almost equal to that of the FTX crash. Typically, when positions get forcefully close en masse like Friday or FTX crash, the board is wiped clean and that usually leads to a recovery rally. If the buyers defend this first bounce, the chances of a recovery rally are higher. Based just on liquidations chart, the bottom could be in, but it cannot be confirmed with utmost certainty.
At present, however, investors need to exercise caution or refrain from going all in at least until Bitcoin price moves swiftly above the $60,000 psychological level and flips it into a support level. But for a higher degree of confirmation, a daily candlestick close above the 200-day Simple Moving Average (SMA) at $60,300 would be more reliable.
BTC/USDT 1-day chart, Source: TradingView
