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

1 year ago

Bitcoin (BTC) has been consolidating wrong the $18,000-$20,000 terms scope since mid-June, pausing a beardown carnivore marketplace that began aft the terms peaked astatine $69,000 successful November 2021.

Many analysts person looked astatine Bitcoin's sideways inclination arsenic a motion of a imaginable marketplace bottom, drafting comparisons from the cryptocurrency's erstwhile carnivore markets that amusement akin terms behaviors preceding sharp, bullish reversals.

Here're 3 strikingly akin trends that preceded past marketplace bottoms.

2018 BTC terms sideways trend

The 2018's Bitcoin carnivore marketplace serves arsenic a large cue for a imaginable marketplace bottommost successful 2022 if 1 looks astatine its eerily akin terms trends and indicators.

One of the cardinal indicators is Bitcoin's 200-week exponential moving mean (200-week EMA; the bluish question successful the illustration below). In 2018 and 2022, Bitcoin entered a agelong play of sideways consolidation aft closing beneath its 200-week EMA.

Except successful 2018, Bitcoin's sideways inclination lasted for nineteen days, with the terms reclaiming its 200-week EMA arsenic support, followed by moves toward astir $14,000 successful June 2019. In 2022, the sideways inclination entered its 19th time connected Oct. 28 but awaits a wide breakout supra the 200-week EMA adjacent $26,000.

Additionally, Bitcoin's play comparative spot scale (RSI) hints astatine a imaginable bottommost formation. In 2018, the RSI's driblet into its oversold territory (below 30) was followed by the BTC's terms sideways inclination and yet by a fully-fledged bullish reversal.

That is halfway akin to Bitcoin's RSI inclination successful 2022, fixed it slipped beneath 30 successful June and followed up with Bitcoin's sideways terms enactment betwixt $18,000 and $20,000 levels. That could travel up with a bullish reversal signifier if the 2018 fractal is repeated.

2013-15 bull trap support

Bitcoin's 2022 carnivore marketplace besides shares similarities to the terms trends witnessed successful 2013-2015, comprising a descending trendline resistance, a anemic bull trap enactment trendline, and a horizontal enactment level.

BTC terms dropped 82% from its December 2013 apical of astir $1,200.

In doing so, Bitcoin attempted to adjacent thrice supra its descending trendline absorption (marked with A, B, and C successful the illustration above). Simultaneously, the terms drew constricted enactment from different descending trendline, resulting successful bull trap rallies.

Bitcoin yet bottomed astatine a horizontal trendline enactment adjacent $200, pursuing it up with a beardown breakout supra the descending trendline resistance, reaching the 0.236 Fib enactment of $429. By December 2017, its terms had reached astir $20,000.

In 2022, Bitcoin's terms has ticked each the boxes regarding mirroring its 2013-15 carnivore market, but for the breakout supra the descending trendline resistance.

Thus, BTC/USD could spot a rally toward $30,000, the 0.236 Fib line, successful aboriginal 2023 if the breakout occurs.

Bitcoin MVRV-Z score

From an on-chain investigation perspective, Bitcoin's 2022 downtrend has made it arsenic undervalued arsenic it was astatine the extremity of erstwhile carnivore markets.

For instance, Bitcoin's Market Value-to-Realized Value (MVRV) Z-score, which measures the coin's over/undervalued comparative to its "fair value," has dropped into the portion that has coincided with erstwhile carnivore marketplace bottoms, arsenic shown below.

The on-chain indicator increases Bitcoin's anticipation to bottommost wrong the $18,000-$20,000 region—in enactment with the 2 fractals discussed above.

Different this time?

Unlike erstwhile years, Bitcoin's 2022 carnivore marketplace occurred chiefly owed to the Federal Reserve's involvement complaint hikes successful effect to persistently higher inflation.

The U.S. cardinal bank's tightening measures removed excess currency from the economy, frankincense leaving investors with small superior to speculate connected risk-on assets. As a result, Bitcoin fell alongside U.S. stocks with a beardown correlation coefficient of 0.80 arsenic of Oct. 28.

Previously, the Bitcoin marketplace recovered weeks oregon months aft its correlation with U.S. stocks dropped beneath zero. The illustration beneath shows 4 instances from the 2014-2016, 2017-2018, 2019-2020, and 2021.

Hence, Bitcoin carries risks of bearish continuation if its correlation with U.S. stocks remains positive.

Meanwhile, implicit 2,000 CME Bitcoin options contracts expiring by the extremity of this twelvemonth amusement a nett bias toward enactment positions. In different words, traders person been anticipating much downside for BTC price.

"Traders spot the anticipation of Bitcoin sliding towards $10,000 to $15,000 but thing little than that is fixed a debased probability," said Nick, analysts astatine information assets Ecoinometircs.

As Cointelegraph reported, the $10,000-$14,000 country remains an country of involvement for a imaginable terms bottommost if a breakdown occurs from the existent levels.

The views and opinions expressed present are solely those of the writer and bash not needfully bespeak the views of Cointelegraph.com. Every concern and trading determination involves risk, you should behaviour your ain probe erstwhile making a decision.

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