The painful abolition in the Bitcoin ( BTC ) market earlier this week caused the price to fall below $40,000 for the first time since September 2021.
Many analysts predicted that the decline would continue towards $30,000 to $35,000, but the price regained $40,000 as support again, and on Wednesday BTC made a sharp move above $44,000. This has reignited hopes that the $40,000 level is perhaps where Bitcoin can reach a bottom before continuing its rise in 2022.
Jurrien Timmer, director of global macro at Fidelity Investments, called $40,000 "key support," noting that Bitcoin has become "technically oversold" near a level that could signal a bounce in the short term.
Underlying Timmer's optimistic view were three catalysts: the stochastic RSI, the so-called S-curve model, and the Bitcoin/Gold ratio indicator.
In detail, the Stochastic RSI is a momentum indicator that compares the closing price of an asset with its range from high to low over a specified period. The indicator oscillates between 0 and 100, with an area above 80 signaling "overbought" conditions and an area below 20 warning of "oversold" conditions.
The indicator helps traders detect trend reversals by tracking the relationship between its upside range (%K) and the moving average of the same upside range (%D). Thus, the market returns a buy signal if the %K wave crosses the %D wave from below into oversold territory.
Similarly, it returns a sell signal if the %K line crosses the %D line from above in overbought territory.
