Bitcoin Tests Critical Support as Bank of America Endorses Crypto Allocation
Market Structure Shifts Higher
- Bitcoin (BTC) stayed steady on Feb. 15.
- Bank of America said that a 1% allocation to BTC would have boosted investment portfolio performance for the past six years.
- RSI variant points to familiar bear market bottom range.
Bitcoin experienced contrasting price actions over the week. The cryptocurrency fell 20.4% from its highest point of $110.7K of the month, but encountered firm demand at $87.5K – the exact level at which a major Wall Street bank announced plans to increase its crypto weighting. Bank of America’s recommendation of 1-4% exposure to Bitcoin in a traditional portfolio coincided with the crypto testing critical price levels, and the combined effect prevented a deep decline. The key question for bulls is if such institutional support is enough to recover six-figure levels, or will a former support now turned resistance halt any bounce at $98.8K?
| Metric | Value |
|---|---|
| Asset | BITCOIN (BTC) |
| Current Price | $87500.01 |
| Weekly Performance | -0.91% |
| Monthly Performance | -20.39% |
| RSI (Relative Strength Index) | 36.2 |
| ADX (Average Directional Index) | 40.0 |
| MACD (MACD Level) | -3740.21 |
| CCI (Commodity Channel Index, 20-period) | -70.11 |
RSI Variant Hits Bear Market Bottom at Precisely $87K
What is interesting to note is that Bitcoin’s RSI (Relative Strength Index) variant tapped deep into bear market bottom readings right at the very support level that price just dipped back to. This RSI variant is a more accurate depiction of oversold conditions in a bull market, and often signals late-stage bear market exhaustion and awesome buying opportunities. The daily RSI is currently at 52.3. This means price is entering the bounce totally neutral, with no overbought or oversold conditions.
Comparable RSI set-ups in August and September have signaled the end of corrective phases before 30-40% rallies ensued. For swing traders, this equilibrium RSI along with the bear market bottom signal implies that most of the selling is likely behind us. The news of Bank of America comes fittingly right as momentum oscillators have returned from oversold December extremes to neutral healthy levels where accumulation typically begins.
ADX at 40 Signals Mature Downtrend Nearing Exhaustion
The recent drop rallied trend strength, with ADX reaching 40.04 – a point renowned for teetering the line between continuation and exhaustion. With the directional movement indicator rising to this level, the bearish momentum that saw price fall from $110,000 to $87,500 is suggested to have lost a good deal of its oomph. The extremes of ADX are such that a pivot is more likely than an extension. In simpler terms, the ADX reading shows that we are moving from a strong downtrend to a phase where the downtrend might consolidate or reverse. When you have both extreme trend strength readings and a critical support level holding, it’s a good environment for range traders to outperform trend followers. So rather than looking for a direct follow-through right away, traders should prepare their strategies for possible sideways movement between $87.5K and $98.8K.
50-Day EMA at $94.4K Becomes First Major Hurdle
The progression of volume and RSI remains uninspiring for the bulls but neutral. Volume steadily declined, indicative of a weak downtrend, and is only now beginning to uptick. The RSI regained the 40 levels but continues to range between 40-50, exhibiting a lackluster trend but still bullish above the 40 level. If Bitcoin can regain the 50-day EMA, mid $90Ks would be the next zone to reclaim clustered near the 100-day ($95.5K) and 200-day SMAs ($96.5K). When we consider the broader moving average structure, the 100-day EMA comes in at $78.6K – which is roughly $9K below us at this given point. The 200-day EMA is located at $65.4K and still projects an even more substantial distance away, providing enough evidence that the more extended uptrend remains intact even with the recent departures come from the trend. The space between the price and these long-term averages explains that the higher time frame still maintains its macro posture to the upside, even as the short-term seems to be under pressure from the bears. The recent conclusions brings additional fundamental backing to this technical exploration of the market.
Resistance Stacks Between $98.8K Monthly Pivot and $104K Highs
Sellers have built strong resistance levels above the current price. The first one is at $98.8K, where the monthly pivot point and the psychological level of $100K meet. The rejection in December from $110.7K identified the area between $104K and the monthly high as a resistance zone, with the weekly pivot at $103.1K contributing to this cluster.
Bulls defended a stronger support zone after being put to the test this week. The $87.5k level held, supported by the 100-week exponential moving average (EMA) at $85.5k directly below. Weekly secondary support comes in at the S1 pivot of $81.7k, with the S1 monthly at $80k acting as a psychological floor. This $80-87k zone absorbed the initial wave of selling that came with the Bank of America allocation news, indicating that both institutional interest and technicals are in confluence.
Importantly, the market structure is indicating that buyers are still in charge so long as the $87.5K level holds on a retest. Given that the RSI is signaling a bear market low, the ADX is signaling an exhaustion at the same time, and we have a bank buy recommendation at that exact same level all coming together at once, this could be an inflection point. Price also rejected lower levels three times this week before bouncing, which makes for a solid case for strong support that could fuel the next impulse leg up if risk appetites return to the crypto market.
Bulls Need Decisive Close Above $94.4K to Shift Momentum
If Bitcoin can get back above the 50-day EMA at $94.4K and then sandwich above the $98.8K level, a potentially profitable long setup could arise. Influencing further gains could be fundamental support from the ongoing institutional trickle. The Bank of America recently suggested that investors should have 2% of their portfolio in Bitcoin.
If price trends above $90K on a clean retest as support after the daily close, this scenario will likely be invalidated, at least for the time being. This would indicate signs of institutional demand defending key levels for the high timeframe uptrend, while bears are too weak of position to defend weekly resistance during its first test after a break. A high timeframe close above $90K on the weekly and monthly timeframe may prove optimal entry for a long swing, as many newbies try to be a hero catching the bottom and top tick of every trend.
After the consolidation, Bitcoin would begin its fifth wave of the bullish impulse – the final wave before a larger correction – and likely the one that cements a new all-time high in the priciest cryptocurrency. Due to the more extended consolidation than what the wave 3 fib extension dictates, this wave might be lengthier and more drawn out, then the price level will solidify.
