Bitcoin collapses to $67,700 and retests 200-week SMA: Is this the bottom?

The Bitcoin price collapsed around $6,300 on Thursday and into Friday - a total of around 8.5%. The price hit a low of $67,640 earlier on Friday, retesting the hugely important 200-week simple moving average (SMA) as it did so. Is this now the bottom for Bitcoin, or could there be one more flush-out to the bull market support trendline at $65,750?

A rapid collapse - can bulls get back above $69K and hold it as support

Source: TradingView

So the support did break, and the $BTC price has spilled down under $70K for the first time since August. As was expected, this was a fairly rapid collapse. The $69K resistance level, top of the 2021 bull market, did not stop the price penetrating through, and it remains to be seen whether the $BTC price will treat it as resistance now, or whether the price will get back above and keep it as support.

If the $BTC price does carry on down, and it could do, given the extremely fearful sentiment pervading in the crypto market, it could come all the way down to strong horizontal support at $65,750, which is also where the bull market support trendline is to be found.

One important factor is that the $BTC price is now very oversold in all time frames as far out as the daily. There is only the weekly time frame where the indicators still need to come down to their bottom limits. So really what we have here is a battle between investors buying the oversold nature of the price, while on the other side, there are investors who are deeply distrustful of the market and who are jumping ship and selling in the midst of the chaos.

A Bitcoin bottom?

Source: TradingView

The daily chart tells a powerful tale. For those waiting to catch the bottom, this chart is suggesting that it might already have been found. One indicator that points to this is the Fibonacci levels. Taking the bottom from the start of the towering green candles as they blew through the bear market trendline, and then taking the top from the $87,400 high, it can be seen that the $BTC price has come down to the deepest Fibonacci level of the 0.786, at $68K.

If we then look at the two indicators at the bottom of the chart; first the Stochastic RSI, which has its indicators right at the bottom ready to rise, and secondly, the Relative Strength Index (RSI), where the indicator line has just gone below the 30.00 level. The last time this happened was in the depths of the bear market as the $BTC price found its first bottom at around $60K.

This chart says “Bitcoin bottom” all over it. Nevertheless, the perversity of the market can always have its say. Retail investors are probably very scared right now. If enough get shaken out here, there may be enough impetus in the collapse to take the price down to just under $66K, but then again, those who buy now could just DCA down.

No v-shaped recovery - bottoming price action instead

Source: TradingView

When looking at the weekly chart it can be observed that in all the big pullbacks there was never a v-shaped recovery. This could be telling us that the same thing will happen this time. There could be some chop sideways up and down, and even a retest of the bull market trendline as this rises toward the price action. 

This may also give the Stochastic RSI indicators the time they need to come down to their bottom limit. Once there, it might be imagined that the next leg of the bull market can begin.