Bitcoin’s dominance rate (BTCD) has been moving higher since January 16 and has recovered a crucial horizontal area in the process. Since May 18, 2021, Bitcoin’s dominance has been trending above the 40% horizontal support area. The area has supported the BTCD multiple times since then. A rebound from this support led to a local high of 47.72% on October 20, but started to slide shortly thereafter.
In early 2022, the BTCD deviated slightly below this support area on two occasions (red circles) before recovering on January 21st.
Future movement of the BTCD
Cryptocurrency trader @ eliz883 tweeted a chart of the BTCD, stating that the current rebound could precede a significant upward move.
The rebound occurred after the BTCD exited a descending resistance line that had been in place since the aforementioned high of 47.72%. It accelerated significantly on January 24, creating a large bullish candle.
BTCD is now approaching the 0.5-0.618 Fib retracement resistance area, which lies between 43.45% -44.45%.
Technical indicators are bullish as both the RSI and MACD are rising (green icons). The RSI is a momentum indicator, and values above 50 are considered bullish. Currently, it is close to moving above 70. Similarly, the MACD, which is created by the short and long term moving averages (MA), is almost positive.
While both are considered bullish developments, it is worth mentioning that the previous time these indicators had these values (red icons), BTCD was very close to its 47.72% top, which coincided with the top of the descending resistance line.
Therefore, while it seems likely that BTCD could move back into the 43.45% -44.45% area, it could still be pushed back once it reaches the zone.
Long-term structure
The weekly chart shows that the 40% support area is the last line of defense before a potential new all-time low. A break below it could be the catalyst for a strong fall.
Both the MACD and the RSI have generated significant bullish divergences (green line). This suggests that an upward movement is likely to follow. Finally, when measured from the 2021 high, there is a clear five-wave pattern to the downside that has already been completed. While there is a possibility that the fifth wave will extend, the structure appears complete as it is.
Therefore, when you combine these with readings from the daily time frame, an eventual breakout from the 43.45% -44.45% area appears to be the most plausible scenario.
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