Will Bitcoin’s sleeping beauty finally wake up?
October 24, 2022 – David Lifchitz – ExoAlpha CIO
After the initial drop from $50,000 at the beginning of the year, Bitcoin has not gone anywhere since July 1, 2022, when it was trading around $19,300. It has hovered in an $18k-$25k range until early September, but then in an even narrower $18.5k-$20.5k range. Its 20-day rolling volatility has even been lower than that of the S&P500…
Therefore, if and when Bitcoin is going to wake up from its lethargy is on everyone’s mind.
Although we don’t have a crystal ball, we can make a few observations:
1) In the last 2 months, Bitcoin has never moved lower than $18.5k or higher than $20.5k: every time it fell below $19k-$18.5k, it was immediately bought back… but also every time it reached over $20.5k, also sold quickly. It appears that there are some deep pockets going back to trading bots trading in that range… but also that hodlers are not willing to sell at the $19k level, but also have no more appetite to buy more for now .
2) Mark Twain’s famous quote “History never repeats itself, but it often rhymes”, also applies to Bitcoin. During the last bear market of 2018, which followed a similar pattern to the 2022 market so far, there have been 2 periods of completely sideways price movements for Bitcoin: from mid-August. until mid-Nov. 2018 (3 months) where it stabilized around 6,000 after a 60% loss from its peak in January 2018, then fell again by approx. 40% in the second half of November 2018 to hit a mid-December low around $3.2k and then bounced a bit towards $4k a week later and went nowhere until early April 2019 (about 3 months too). Thus, it is not uncommon to see Bitcoin consolidate sideways for about 3 months after a sharp decline, as frustrating as that can be for volatility-junky traders.
3) There is a lot of macroeconomic news coming between late October and mid-November (US, US and BCE inflation meetings, US mid-term elections, on top of a worldwide energy crisis, the Russia-Ukraine war escalating, etc.) that can affect risk assets one way or the other, and especially as traders are so nervous to react so as not to miss the next move up or down, which could repeat the 2018 pattern with another leg down around mid-November or ignite a strong bounce, which would also more or less coincide with the 3-month sideways patterns previously observed after large downmoves.
So the good news is that Bitcoin should eventually move again in the next few weeks, but the open question remains which way.
Update: 25 October 2022
After today’s US FED whispers of an intervention in US Treasuries through another Operation Twist, BTC jumped 5% higher straight up to $20,300, but so far stalled there, which is the current short-term resistance. Its high-octane cousin ETH jumped 12% higher…
BTC/USDT 1-Day Chart
What happens in the next few days will be very telling: another head fake like, for example, 9-13. September or a sustainable breakout heading to $25k? But as hinted yesterday, spring price volatility has been so compressed that the release will be fierce, and we got a preview today.
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