Fidelity exec says Bitcoin is ‘technically oversold,’ making $40K a ‘pivotal support’

A painful retracement within the Bitcoin (BTC) market earlier this week despatched the worth under $40,000 for the primary time since September 2021.

Many analysts predicted the decline to proceed towards the $30,000 to $35,000 vary, however the worth reclaimed $40,000 as help once more and on Wednesday BTC made an abrupt transfer above $44,000. This rekindled hopes that the $40,000 degree is maybe the place Bitcoin might backside out earlier than persevering with its transfer increased in 2022.

Jurrien Timmer, the director of worldwide macro at Fidelity Investments, called $40,000 a “pivotal help,” noting that Bitcoin has grow to be “technically oversold” close to the extent, which can quantity to a rebound within the short-term.

BTC/USD daily price chart. Source: TradingView

At the core of Timmer’s bullish outlook were three catalysts: a Stochastic RSI, the so-called S-curve model and a ratio metric of Bitcoin to gold.

A clear bounce in Bitcoin’s Stochastic RSI

In detail, the Stochastic RSI is a momentum indicator that compares an asset’s closing price with its high-low range over a specific period. The indicator oscillates between 0 and 100, with the area above 80 signaling “overbought” and the area below 20 alerting on “oversold” conditions. 

The indicator assists traders in spotting trend reversals by tracking the relationship between its high-low range (%K) and the moving average of the same high-low range (%D). So, the market returns a buy signal if the %K wave crosses the %D wave from below in the oversold territory.

Similarly, it returns a sell signal if the %K line crosses %D line from above in the overbought territory.

As Timmer notes, Bitcoin’s %K wave has been rising above the %D wave, signaling a buy trend just as the price maintained support above $40,000.

BTC/USD price chart featuring its recent pivot at support and Stochastic RSI readings. Source: Fidelity

“Bitcoin has reached a line in the sand at $40,000 and is now technically oversold,” tweeted Timmer early Wednesday, adding that “like $30,000 the $40,000 level seems to be a pivotal support area.”

Price follows the S-curve model

Timmer further identified a so-called demand curve — as shown via the pin wave in the graph below — that has been instrumental in predicting the end of Bitcoin’s bearish cycles since 2012.

Bitcoin supply and demand models. Source: Fidelity

Between April and June 2021, the curve followed BTC price action in bouncing back from $30,000, and now, it has been acting as the same support near $40,000 which raising the possibility that the next BTC rebound could reach levels near $100,000.

Related: Wall Street still not convinced on Bitcoin $100K this year: JPMorgan survey

“The $30,000 level in 2021 provided support based on my demand model (S-curve model),” wrote Timmer, adding:

“That same level looks to have moved up to $40,000, providing fundamental support once again. It’s a moving target that generally provides a fundamental anchor for price.”

BTC/Gold ratio suggests Bitcoin is oversold

Bitcoin also appears oversold, albeit “moderately,” regarding its price-performance against gold. As Timmer noted, the so-called BTC/Gold ratio has slipped to support at 22 after topping out twice at 37.4 in 2021.

Bitcoin vs. Gold. Source: FMRCo, Bloomberg, Fidelity

Meanwhile, the plunge pushed the ratio’s Bollinger Bands into oversold territory, a classic buy signal that indicates that capital could start moving from gold to Bitcoin markets.

The prediction got here in keeping with Bloomberg Intelligence’s latest crypto outlook. Penned by their senior commodity strategist, Mike McGlone, the report recognized the capital rotation out of gold and into the Bitcoin market. McGlone additionally famous that the pattern would proceed particularly in opposition to a close to four-decade excessive in inflation which is the results of the U.S. Federal Reserve’s free financial insurance policies.

“We see gold extra prone to advance in direction of $2,000 an oz by 2022, however Bitcoin to extend at a higher velocity,” McGlone wrote. 

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