‘Bitcoin rainbow’ indicator drops to all-time low; Can BTC drop to $10k?

After days of struggling to limit further losses, Bitcoin (BTC) bulls have gained ground and stabilized the price below $17,000. Meanwhile, investors are looking for signals that could trigger Bitcoin’s price movement in either direction.

The Bitcoin Center Rainbow price chart is one of the gauges utilized by the market to determine the possible next Bitcoin price action. The tool uses color bands that follow a logarithmic regression and assess past performance to provide a potential insight into its long-term movements.

Interestingly, as of November 19, the Bitcoin indicator dropped below the “Basically a Fire Sale” level represented by the color blue for the first time; the level is the lowest band on the Bitcoin rainbow chart.

From the chart, Bitcoin has been stuck in the ‘Basically a Fire Sale’ zone for several weeks. Historically, Bitcoin last reached the level in March 2020, where the asset consolidated before rising against last year’s bull market.

Interestingly, the indicator remains bullish on Bitcoin’s long-term outlook, highlighting that the asset’s price is likely to reach a six-figure value in the next two years. At the same time, the chart suggests possible Bitcoin ‘HODL’ status at the end of the year.

Bitcoin downtrend exhaustion

The indicator’s break to the downside comes after Bitcoin appeared to exhaust the downward momentum partially triggered by the collapse of the FTX cryptocurrency exchange. At today’s price, Bitcoin has found a support level at $16,200 and breach of the position is likely to lead to more correction.

Indeed, the possibility of a further correction towards $10,000 was highlighted recently after Bitcoin flashed its strongest sell signal since 2021. Overall, Bitcoin’s price has been stuck in a downtrend with failed attempts to break past $17,000 amid low buying pressure as liquidity concerns prevails.

As Bitcoin found some stability, the focus earlier turned to the bull’s potential to trigger a rally towards $18,000. In recent weeks, the $18,000 level has emerged as a crucial support position for the flagship cryptocurrency.

Bitcoin Technical Analysis

From a technical analysis perspective, daily Bitcoin gauges lean towards the bearish side, with a summary pointing towards “sell” at 10. Moving averages suggest a “strong sell” at 14 while oscillators are “neutral” at nine.

Currently, Bitcoin was trading at $16,500 as of press time with a loss of less than 1% over the past 24 hours.

Overall, Bitcoin’s underperformance is likely to be removed once the ongoing uncertainty in the crypto market stemming from the FTX saga stabilizes.

Despite most trading platforms publishing proof of reserves, chain data is indicates an exodus of Bitcoin from exchanges to self-custodial wallets. One area of ​​focus is the ability of crypto exchanges to assure users that their money is safe.

Disclaimer: The content of this page should not be considered investment advice. Investment is speculative. When you invest, your capital is at risk.