BTCUSD: Comparing Previous Bear Markets

7 мар. 2023 г.

Bitcoin is facing a critical resistance level in its path upwards - $24,400. Let's look at previous bear markets to see what the most likely scenario might be for its price action.

The resistance level I'll be looking at today is a 1000-period geometric median (from now on, Q2) calculated from resistance in each candlestick's body/wick. This is the lower quartile (typically, a cross over this resistance line signifies the start of a strong uptrend).

On this chart, the aqua-colored line is the 100-period volatility-weighted moving average. You can find the indicator in my scripts.

2015



In 2015, Bitcoin attempted to break through both resistance line Q2 (white) and the volatility MA. Failing to do so, it collapsed strongly to the downside, before reaching the dominant low support (in green).

Bitcoin then retested the volatility MA, falling to the dominant low support again, before finally breaking through the volatility-weighted MA and retesting resistance line Q2 twice. Using the volatility-weighted MA as a crutch, Bitcoin finally began to rally and broke through Q2.

2018-2019



In the 2018-2019 bear market, Bitcoin used Q2 as support seven-eight times, but was consistently rejected by the volatility MA. This resulted in the descending triangle and the collapse to the dominant low support, before breaking to the upside.

2020



2020's flash crash resulted in the price collapsing to the dominant low support, then gradually breaking past Q2.

Takeaways
The similarities to late 2015 are the most striking.

• Bitcoin has been rejected by Q2 (the FTX debacle)
  
• Bitcoin has since regained the volatility MA
  
• Bitcoin has retested the Q2 twice. Perhaps on a third retest it will break through, like in 2015?
  

However, to play the devil's advocate and to cover our bases, it is important to note that in these three bear markets in Bitcoin's history, Bitcoin has always retested the dominant low support. Ours is sitting at $16,100 at the moment.

In my opinion, a scenario where Bitcoin could go down this low is extremely unlikely, unless a major stablecoin, exchange, or lender collapses. Rather, if Bitcoin falls further (such as due to monetary policy or macroeconomic conditions), I see it more likely to be a slow and gradual decline over a few months - to around $20,000, which I have forecasted on the chart.

Ultimately, $24,400 is the resistance level to look for. I'd love to hear your thoughts, is this an ascending triangle forming between the volatility MA and Q2?

wbburgin