Home » 3 striking similarities with past Bitcoin price bottoms — But there’s a catch

3 striking similarities with past Bitcoin price bottoms — But there’s a catch

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Bitcoin (Bitcoin) has been consolidating within the $18,000-$20,000 range since mid-June, pausing a strong bear market that began after prices peaked at $69,000 in November 2021. .

Many analysts see bitcoin’s sideways trend as a sign of a potential market bottom, comparing it to the cryptocurrency’s previous bear markets showing similar price action preceding a sharp bullish reversal. .

Below are three remarkably similar trends that have preceded past market bottoms.

BTC price sideways trend in 2018

Bitcoin’s bear market in 2018 is a major clue that the market may bottom out in 2022.

One of the key indicators is Bitcoin’s 200-week exponential moving average (200-week EMA, blue wave in the chart below). In 2018 and 2022, Bitcoin entered a long-term sideways correction after falling below his 200-week EMA.

BTC/USD weekly price chart featuring the 2018 bear market fractal.Source: Trading View

With the exception of 2018, Bitcoin’s sideways trend lasted for a day, with the price retracing the 200-week EMA as support before moving toward around $14,000 in June 2019. In 2022, the sideways trend plunged into his 19th day on Oct. 28, but clearly breached his 200-week EMA near $26,000.

Additionally, Bitcoin’s weekly Relative Strength Index (RSI) suggests a potential bottom formation. In 2018, after the RSI dipped into the oversold territory (below 30), BTC’s price trended sideways, eventually leading to a full-fledged bullish reversal.

This is half similar to Bitcoin’s RSI trend in 2022. A bullish reversal phase could follow if the 2018 fractal repeats, given that Bitcoin’s price leveled off between $18,000 to $20,000 to $30 in June. There is a nature.

2013–2015 Bull Trap Support

Bitcoin’s 2022 bear market shares similarities to the price trend seen in 2013-2015, consisting of a downtrendline resistance, a weak bull trap support trendline, and a horizontal support level. increase.

BTC/USD weekly price chart featuring the 2014-2015 bear market fractal.Source: Trading View

BTC’s price has fallen 82% from its December 2013 high of around $1,200.

In doing so, Bitcoin attempted to close three times above the downtrendline resistance (marked by A, B, and C in the chart above). At the same time, price pulled limited support from another downtrend line, triggering a bull trap rally.

Bitcoin eventually bottomed out at the horizontal trendline support near $200, broke above the downtrendline resistance and reached the 0.236 Fib line at $429. By December 2017, its price reached almost $20,000.

Bitcoin 2013–2015 bear market weekly chart (expanded).Source: Trading View

In 2022, Bitcoin’s price has ticked all the boxes about mirroring the bear market of 2013-2015.

Bitcoin 2022 bear market weekly chart (expanded version).Source: Trading View

Therefore, BTC/USD could rise towards the 0.236 Fib line of $30,000 in early 2023 if a breakout occurs.

Bitcoin MVRV-Z Score

from On-chain analysis perspectivewith Bitcoin’s 2022 downtrend making it as undervalued as the end of the previous bear market.

For example, Bitcoin’s Market Value vs. Realized Value (MVRV) Z-score measures the coin’s overvaluation/undervaluation relative to its “fair value” and, as shown below, is an area consistent with previous bear market troughs. fell into .

Bitcoin MVRV-Z score and market bottom.Source: Glassnode

On-chain indicators increase the chances of Bitcoin bottoming out within the $18,000-$20,000 range. This is consistent with her two fractals above.

Is this time different?

Unlike the previous year, Bitcoin’s 2022 bear market was largely caused by the US Federal Reserve’s interest rate hike. persistently high inflation.

Tightening measures by the US central bank have removed excess cash from the economy, leaving investors with little money to speculate in risk-on assets. As a result, Bitcoin fell alongside US stocks with a strong correlation coefficient of 0.80 as of Oct. 28.

Related: Bitcoin Reflects Pre-Breakout 2020, But Analysts Are Divided On Whether This Time Is Different

Previously, the Bitcoin market recovered weeks or months after its correlation with U.S. equities dropped below zero. The graph below shows his four cases from 2014-2016, 2017-2018, 2019-2020 and 2021.

BTC/USD weekly chart.Source: Trading View

Therefore, if the correlation with US equities remains positive, Bitcoin risks remaining bearish.

Meanwhile, the over 2,000 CME Bitcoin options contracts expiring by the end of this year show a net bias towards put positions. In other words, traders expect a further drop in BTC price.

CME Bitcoin Options position distribution.Source: Economic econometrics

“Traders believe Bitcoin could fall towards $10,000 to $15,000, but anything below that is given a low probability,” said analysts at data resource Ecoinometircs. says Nick.

The $10,000-$14,000 area, as reported by Cointelegraph Remains an area of ​​interest for possible price bottoms If a breakdown occurs from the current level.

The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. All investment and trading movements involve risk. You should do your own research when making a decision.