Bitcoin Set to Enter Disbelief Phase — Should Hodlers Prep for $2.8K?

Bitcoin price (BTC) performed as expected over the past week as 8% was shaved off its price of $7,571.80 between Dec. 8 and Dec. 14. Does this mean the digital asset is due for a reversal? As much as Bitcoin holders and I want this, one has to look at the facts. 

Currently, Bitcoin has a distinct lack of bullish indicators that offer any hope of a short term reversal and even John Bollinger, the founder of the Bollinger Bands indicator tweeted out this somewhat cryptic tweet on Dec. 13.

“Most cryptocurrencies are at or near Bollinger Band Squeeze levels. Time to pay attention.” 

For those that don’t know what this means, allow me to explain.

Daily crypto market performance

Daily crypto market performance. Source: Coin360.com

What is a Bollinger Bands squeeze?

The Bollinger Bands indicator is a tool that many traders can’t live without. Made up of 3 lines, the central line in red is the moving average (MA) and the lower band serves as dynamic support, whilst the upper band serves as a dynamic resistance.  

BTC USD daily chart

BTC USD daily chart. Source: TradingView

Genius in its simplicity, the bands automatically widen when volatility increases and contract when volatility decreases. For day traders, it’s an invaluable tool to have, as the moving average can have several purposes. 

For example, if the price of an asset is sitting on the MA for a long period, which is typically when there is little to no volatility, the upper and lower bands begin to close in and “squeeze,” which results in a breakout.

When the bands are wide, traders usually watch the price play between the MA and resistance, which means the MA serves as a level of support as well as between the MA and the support, in which case the MA becomes the resistance.

When the bands are wide, it is typically a good time to trade, as you one can ride between the support and resistance. It’s almost predictable price action.

However, when the BB squeezes, it becomes difficult to establish which direction the breakout is going to occur, and this is what John Bollinger is alluding to. There’s going to be a big move, but which way?

The daily MACD is on the verge of a bearish cross

BTC USD MACD daily chart

BTC USD MACD daily chart. Source: TradingView

To gauge which direction a potential breakdown could occur, the moving average divergence convergence (MACD) can offer some clues. The pattern that we’re currently seeing can also be seen in September when the price broke down by around $3,000. However, it can also be seen in October, where the price unexpectedly jumped up by $3,000.  

Both of these movements coincided with a Bollinger Band squeeze. But is it likely that the Bitcoin price will repeat the same move as it did in late October? 

The monthly MACD is just as bearish

BTC USD MACD monthly chart

BTC USD MACD monthly chart. Source: TradingView

The monthly MACD rarely crosses. In fact, in the history of Bitcoin, it has seemingly only crossed 4 times. As 2019 draws to a close, it looks as if Bitcoin holders will endure a lot of pain.

The last time this happened, Bitcoin lost 60% of its USD value, as it fell from $8,500 in July 2018 to a low in the region of $3,300 in February 2019.

A 60% drop from today's value of $7,100 would land the digital asset around $2,840.

The RSI provides some hope

BTC USD RSI daily chart

BTC USD RSI daily chart. Source: TradingView

At the moment, the Relative Strength Index (RSI) indicator is not showing an oversold reading. 

The daily RSI is currently around 33.80 and as can be seen in the image above, Bitcoin previously did not experience a reversal until somewhere between the mid-20s and mid-teens in recent months.

BTC USD RSI weekly chart

BTC USD RSI weekly chart. Source: TradingView

The weekly RSI isn’t much better either. As shown below, its current reading is around 40, whereas the last time it bounced the RSI was reading 23.70. 

BTC USD RSI monthly chart

BTC USD RSI monthly ch