According to crypto analyst Yashu Gola, the fundamentals that accompanied previous Bitcoin bear markets are completely different from 2022. However, it risks the recovery for Bitcoin price. Many analysts looked to Bitcoin’s sideways trend as a sign of a potential market bottom. It also made comparisons from previous bear markets that showed similar price behavior before BTC’s sharp bullish returns. Yashu Gola considers three strikingly similar trends that preceded past market bottoms.
Bitcoin price 2018 sideways trend
The Bitcoin bear market of 2018 has eerily similar price trends and indicators. In this respect, it serves as an important clue for a potential market bottom in 2022. One key indicator is Bitcoin’s 200-week exponential moving average (200-week EMA; blue wave in chart below). In 2018 and 2022, Bitcoin entered a long period of side consolidation after closing below its 200-week EMA.
BTC weekly price chart with 2018 bear market fractal / Source: TradingViewBitcoin’s sideways trend lasted 11 days, excluding 2018. The price retraced its 200-week EMA as support. It then moved towards around $14,000 in June 2019. In 2022, the sideways trend entered its 19th day on October 28. However, a clear break above the 200-week EMA near $26,000 is expected.
Additionally, Bitcoin’s weekly relative strength index (RSI) points to a potential bottom. In 2018, the fall of the RSI into the oversold zone (below 30) was followed by BTC’s sideways trend and finally a full-fledged bullish reversal. This is similar to the Bitcoin RSI trend in 2022 in half, given that it dropped below 30 in June and followed Bitcoin’s sideways price action between the $18,000 and $20,000 levels. If the 2018 fractal repeats, this uptrend is likely to follow the reversal phase.
2013-2015 bull trap support
Bitcoin’s 2022 bear market shares similarities with price trends witnessed in 2013-2015, consisting of a descending trendline resistance, a weak bull trap support trendline, and a horizontal support level.
BTC weekly chart with 2014-2015 bear market fractal / Source: TradingViewBTC is down 82% from its December 2013 peak of $1,200. In doing so, Bitcoin tried to close three times above the descending trendline resistance. They are marked with A, B, and C in the chart above. Simultaneously, the price caused bull trap rallies with limited support from another descending trendline.
Bitcoin finally bottomed out at a horizontal trendline support near $200. It then had a strong break above the descending trendline resistance. Thus, it reached the $0.236 Fib line at $429. By December 2017, its price had reached nearly $20,000.
Bitcoin 2013–2015 bear market on weekly chart / Source: TradingViewcryptocoin.comAs you follow, in 2022 Bitcoin ticked all the boxes to reflect the 2013-2015 bear market, except for the break above the descending trendline resistance.
Bitcoin 2022 bear market on weekly chart / Source: TradingViewTherefore, if a breakout occurs, a rally towards $30,000 from the 0.236 Fib line in early 2023 is possible.
Bitcoin MVRV-Z score
From an on-chain analysis perspective, Bitcoin’s 2022 downtrend has rendered it worthless, just as at the end of previous bear markets. For example, the Bitcoin’s Market Value to Realized Value (MVRV) Z-score, which measures the over/undervalue of crypto relative to its ‘fair value’, fell into the region that coincided with previous bear market lows, as shown below.
Bitcoin MVRV-Z Score and market bottoms / Source: GlassnodeThe on-chain indicator increases the likelihood of Bitcoin bottoming out in the $18,000 – $20,000 region in line with the two fractals above.
Is it different this time for Bitcoin price?
Unlike previous years, Bitcoin’s 2022 bear market was mainly caused by interest rate hikes by the Fed in response to consistently high inflation. Fed’s tightening measures removed excess cash in the economy. Thus, it allowed investors to speculate on risky assets with little capital.
As a result, BTC fell next to US stocks with a strong correlation coefficient of 0.80 as of October 28. Previously, the Bitcoin market recovered weeks or months after its correlation with US equities dropped below zero. The chart below shows four examples from 2014–2016, 2017–2018, 2019–2020, and 2021.
BTC weekly price chart / Source: TradingViewTherefore, if its correlation with US stocks remains positive, BTC bears bearish risks.
CME Bitcoin options position distribution / Source: Ecoinometrics“Traders see the possibility of Bitcoin slipping to $10,000 to $15,000,” said Nick, Ecoinometrics data source analyst. But they see a lower probability of going lower than that,” he said. Meanwhile, over 2,000 CME Bitcoin options contracts expiring later this year show a clear bias towards sell positions. In other words, traders expect further declines for the BTC price.
