Bitcoin Is Showing Signs of a Major Bottom, Says Katie Stockton

Markets rarely ring a bell at the bottom. More often, the selling simply starts running out of steam.

That may finally be happening for Bitcoin.

After months of weakness pushed Bitcoin toward $60,000, Fairlead Strategies founder Katie Stockton says some of the long-term technical signals she watches are beginning to turn in a way that could point to something more significant than another temporary bounce.

“We are seeing those signs of long-term downside exhaustion already,” Stockton told Coinage in a new interview Monday.

For Stockton, a chartered market technician who has spent her career studying momentum, trend and support levels, the shift is notable for a few reasons. Bitcoin has already registered a measurable long-term oversold condition on two of Fairlead’s preferred indicators. More importantly, Stockton says long-term momentum itself has begun to tick higher after previously accelerating to the downside.

"Not only is there a long term oversold condition which is measurable ... but then also we have a momentum uptick on a long term basis," she said. "That's really, very intriguing."

Last week, implied Bitcoin volatility sank to yearly lows, as measured by Volmex's BVIV index. And according to CryptoQuant founder Ki Young Ju, hedge funds have now flipped net long BTC futures.

Bitcoin’s latest downturn has revived the familiar debate over crypto’s four-year cycle and whether another major bottom could arrive as traders approach the period when previous bear markets have historically started to turn.

Franklin Templeton’s Sandy Kaul recently told Coinage that the widespread expectation of an October turn could itself encourage traders to get ahead of it.

“There is such a psychological component to markets that just the fact that everybody says by October the markets are going to turn, the markets will probably start to turn prior to October,” Kaul said. “People are going to want to be positioned before that.”

Stockton is more cautious about relying on the cycle itself.

“I’m not really a cycles follower per se,” she said. “I think, again, it’s a point of interest, but it’s not a reason to make an investment decision.” Instead, Stockton points to more of the technical signals stacking up.

"When you see Bitcoin and other cryptocurrencies come into a level where they've either had demand before — or perhaps it's a level based on an indicator, or a Fibonacci retracement level. We use something called the cloud model. We like that, too — so there's different ways of gauging potential support," she said. "Where there was once demand, there's more likely to be demand there going forward."

Indeed, watching for those objectively timed triggers is what went into launching the Amplify Fairlead Tactical Bitcoin ETF last month. As Stockton explains, the fund adds leverage when Bitcoin momentum starts to shift.

"It is driven by momentum indicators primarily and we will just listen to the market, she said. "You really want to be there for when it is shooting up, of course, to take advantage of that."

In fact, Stockton is seeing a somewhat similar stabilization taking place in gold. After a cyclical downturn of its own, gold recently cleared its 50-day moving average, which Stockton views as a positive short-term catalyst that could produce a more substantial relief rally. Interestingly, after a brief period of a breakdown in correlation, Bitcoin seems to be back in tandem with its "digital gold" moniker.

However, if given the choice of calling a more long-term bottom between the two, Stockton mentioned Bitcoin likely looks like a healthier call. Bitcoin has already reached the kind of long-term oversold readings that gold has not.

"Gold has seen a pretty meaningful loss of long term upside momentum, and of course that's happened for Bitcoin as well, but they're quite different in that Bitcoin had already become oversold on the monthly chart, whereas gold was not quite there yet," she said. "So I think that's a differentiating factor to acknowledge that Bitcoin in a way, has a better chance of putting in a major low meaning a long term or lasting low as opposed to gold."

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