3 Striking Similarities to Previous Bitcoin Price Bottoms – But There’s a Catch
Bitcoin (BTC) has been consolidating within the $18,000-$20,000 price range since mid-June, halting a strong bear market that started after the price peaked at $69,000 in November 2021.
Many analysts have seen Bitcoin’s sideways trend as a sign of a potential market bottom, drawing comparisons from the cryptocurrency’s past bear markets that show similar price behavior before sharp, bullish reversals.
Here are three strikingly similar trends that preceded previous market bottoms.
2018 BTC price sideways trend
2018’s Bitcoin bear market serves as an important pointer to a potential market bottom in 2022 if one looks at its eerily similar price trends and indicators.
One of the key indicators is Bitcoin’s 200-week exponential moving average (200-week EMA; the blue wave in the chart below). In 2018 and 2022, Bitcoin entered a long period of sideways consolidation after closing below the 200-week EMA.
Except in 2018, Bitcoin’s sideways trend lasted for nineteen days, with the price regaining its 200-week EMA as support, followed by moves towards approximately $14,000 in June 2019. In 2022, the sideways trend entered its 19th day on 28 .October, but expect a clear breakout above the 200-week EMA near $26,000.
Additionally, Bitcoin’s weekly Relative Strength Index (RSI) hints at a potential bottom formation. In 2018, RSI’s fall into its oversold territory (below 30) was followed by BTC’s price sideways trend and finally by a full-fledged bullish reversal.
It is halfway equal to Bitcoin’s RSI trend in 2022, given that it dipped below 30 in June and followed up with Bitcoin’s sideways price action between the $18,000 and $20,000 levels. It could follow up with a bullish reversal phase if the 2018 fractal repeats.
2013-15 bull capture subsidy
Bitcoin’s 2022 bear market also shares similarities with the price trends witnessed in 2013-2015, which include a descending trendline resistance, a weak bull trap support trendline, and a horizontal support level.
The BTC price has fallen 82% from its December 2013 peak of around $1,200.
In doing so, Bitcoin attempted to close three times above its descending trendline resistance (labeled A, B, and C in the chart above). At the same time, the price received limited support from another descending trend line, resulting in a bull trap rally.
Bitcoin finally bottomed out on a horizontal trendline support near $200, followed it up with a strong breakout above the descending trendline resistance, reaching the 0.236 Fib line at $429. By December 2017, the price had reached almost $20,000.
By 2022, Bitcoin’s price has ticked all the boxes regarding mirroring the 2013-15 bear market, except for the breakout above the descending trendline resistance.
Thus, BTC/USD could see a rally towards $30,000, the 0.236 Fib line, in early 2023 if the breakout occurs.
Bitcoin MVRV-Z Score
From an on-chain analysis perspective, Bitcoin’s downtrend in 2022 has made it as undervalued as it was at the end of previous bear markets.
For example, Bitcoin’s Market Value-to-Realized Value (MVRV) Z-score, which measures the coin’s over/undervalued relative to its “real value,” has fallen into the region that has coincided with previous bear market bottoms, as shown below.
The on-chain indicator increases Bitcoin’s opportunity to bottom in the $18,000-$20,000 region – in line with the two fractals discussed above.
Different this time?
Unlike previous years, Bitcoin’s 2022 bear market occurred primarily due to the Federal Reserve’s interest rate hikes in response to persistently higher inflation.
The US central bank’s tightening measures removed excess cash from the economy, leaving investors with little capital to speculate in risky assets. As a result, Bitcoin coincided with US stocks with a strong correlation coefficient of 0.80 as of October 28.
Related: Bitcoin Mirrors 2020 Pre-Breakout, But Analysts Differ If This Time Is Different
In the past, the Bitcoin market rallied weeks or months after the correlation with US stocks fell below zero. The diagram below shows four instances from 2014-2016, 2017-2018, 2019-2020 and 2021.
Therefore, Bitcoin is at risk of bearish continuation if the correlation with US stocks remains positive.
Meanwhile, 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 have been expecting more downside for the BTC price.
“Traders see the possibility of Bitcoin sliding towards $10,000 to $15,000, but anything lower than that is given a low probability,” said Nick, analysts at data resource Ecoinometrics.
As Cointelegraph reported, the $10,000-$14,000 range remains an area of interest for a possible price bottom if a breakdown occurs from current levels.
The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trade involves risk, you should do your own research when making a decision.
