Guggenheim Chief Investment Officer: Bitcoin price will drop to $8,000, but technical analysis shows otherwise

Bitcoin (BTC) is expected to drop 70% to $8,000, according to comments from Guggenheim chief investment officer Scott Minerd. This is not the first time he has made a bearish decision, he has also made bullish decisions in the past. However, Minerd's most recent forecast came before a major reversal.

Scott Minerd's Bitcoin Price Prediction:
- $600,000 → $60,000 → $30,000.
- From $30,000 to $10,000 → Price to $65,000
- $8,000 to $30,000 (again) → TBD. pic.twitter.com/NWjrRdegFM

— mhonkasalo (@mhonkasalo) May 23, 2022

It’s worth noting that Minerd is a Bitcoin bull if extrapolating from previous comments, and he has long predicted that Bitcoin will be a digital asset in the six-figure range. But if traders and investors are taking his comments as a sentiment indicator of market lows, other corroborating data must be used.

Long-term oscillator values support bullish reversal

The weekly and monthly RSI (Relative Strength Index) and Composite Index suggest that an extreme has been encountered. These extremes do not predict or guarantee reversals. However, they warned bears that further downside momentum could be severely limited or wiped out.

The weekly RSI remains bullish, although it is below the oversold levels of 50 and 40 - until it hits 30, the bullish RSI remains. Currently, the weekly RSI level is at 33, the lowest since the week of December 10, 2018, and just shy of the March 2020 COVID-19 crash low of 33.48.

Likewise, Bitcoin’s weekly composite index readings are also at extremes. It is currently trading at its lowest level since the week of February 8, 2018. Historically, the current level of the weekly composite index has been a strong indicator that swing lows are likely in sight.

The black vertical line identifies the most recent all-time low for the Bitcoin weekly composite index.

Oscillator chart patterns can help identify impending reversals

Using basic chart patterns, such as rectangles and triangles on Japanese candlestick charts or histograms in the US, is not limited to price charts. For example, the great analyst and trader Connie Brown (creator of the Composite Index) made analysts and traders pay attention to the chart patterns of oscillators.

The falling wedge pattern on the monthly RSI meets all the requirements for confirmation of the pattern: five touches of the trendline. It’s important to note that Bitcoin’s monthly RSI, like the weekly RSI, remains bullish, with the current RSI just below the first oversold level of 50.

Another major dynamic in Bitcoin’s oscillations is the regular bullish divergence between the monthly RSI and the monthly composite index. The Composite Index, created by Connie Brown, is essentially the RSI with a momentum calculation - it captures movements that the RSI cannot.

Note the line structure of the monthly relative strength index and the composite index. The RSI is showing lower lows, but the Composite Index is showing higher lows. This is a common bullish divergence.

Common bullish divergence is usually measured between price and an oscillator, but it can also be measured between two oscillators. A regular bullish divergence is a warning sign that the current downtrend may face a correction higher or the start of a new uptrend.

Bitcoin price action remains correlated with stocks

This week, especially Thursday (May 26, 2022), should be of particular interest due to the ongoing correlated behavior between Bitcoin and the broader cryptocurrency market and equities.

Economists and Wall Street continue to dismiss growth concerns. After last week's dismal quarterly report from Target (NYSE: TGT ), all eyes are on other big-name retailers due to report results on May 26: Macy's (NYSE: M ), Dollar Tree (NASDAQ : DLTR) and Dollar General (NYSE: DG) are all set for May 26.

However, with most stocks trading below bear market levels, any negative news from retail stocks or the Fed could be considered "priced in." Trading volumes on the tech-heavy Nasdaq (NASDAQ: QQQ ) rose, as did flows into bitcoin and the broader cryptocurrency market.

So if stocks bounce back, Bitcoin bounces back. Bitcoin’s upside potential may be limited to the key psychological and 2022 volume control point of $40,000.