Bitcoin (BTC) has been consolidating within the $18,000 to $20,000 price range since mid-June, pausing a strong bear market that began after the price peaked at $69,000 in November 2021.
Many analysts have looked at Bitcoin’s sideways trend as a sign of a potential market bottom, making comparisons to previous cryptocurrency bear markets that show similar price action preceding sharp bullish pullbacks.
Here are three strikingly similar trends that preceded previous market bottoms.
The 2018 Sideways Trend for BTC Price
The 2018 Bitcoin bear market serves as a major clue to a potential market bottom in 2022 if one looks at their 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 on the chart below). In 2018 and 2022, Bitcoin entered a long period of sideways consolidation after closing below its 200-week EMA.
Except in 2018, Bitcoin’s sideways trend lasted for 1 day, 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 the 28th. but expects a clear break above the 200-week EMA near $26,000.
Additionally, Bitcoin’s weekly Relative Strength Index (RSI) hints at a potential bottom formation. In 2018, the RSI falling into its oversold territory (below 30) was followed by the BTC price trending sideways and eventually a full-blown bullish reversal.
That is somewhat similar to the trend of Bitcoin’s RSI in 2022, given that it slipped below 30 in June and continued Bitcoin’s sideways price action between the $18,000 and $20,000 levels. That could follow a bullish reversal phase if the 2018 fractal repeats.
2013-2015 Bull Trap Support
Bitcoin’s 2022 bear market also shares similarities with price trends witnessed in 2013-2015, comprising a descending trend line resistance, a weak bull trap support trend line, and a horizontal support level.
The BTC price is down 82% from its December 2013 high of around $1,200.
In doing so, Bitcoin attempted to close three times above its descending trendline resistance (marked A, B, and C on the chart above). Simultaneously, price gained limited support from another downtrend line, leading to bull trap rallies.
Finally, Bitcoin bottomed out at horizontal trendline support near $200, following which a sharp break above descending trendline resistance occurred.reaching the 0.236 Fib line of $429. By December 2017, its price had reached almost $20,000.
In 2022, Bitcoin price has checked all the boxes with regards to mirroring its 2013-2015 bear market, except for the break above descending trendline resistance.
Therefore, the BTC/USD pair 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 2022 bear trend has made it just 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 how over/undervalued the coin relative to its “fair value,” has fallen into the region that has coincided with the funds of the previous bear markets, as shown below.
The on-chain indicator raises the possibility of Bitcoin bottoming within 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 came about primarily due to interest rate hikes by the US Federal Reserve in response to persistently high inflation.
Tightening measures by US central banks have removed excess cash from the economy, leaving investors with little capital to speculate on risky assets. As a result, Bitcoin fell alongside US stocks with a strong correlation coefficient of 0.80 as of Oct. 28.
Previously, the Bitcoin market rallied weeks or months after its correlation with US stocks dipped below zero. The chart below shows four cases from 2014-2016, 2017-2018, 2019-2020, and 2021.
Therefore, Bitcoin carries downside continuation risks if its correlation with US equities remains positive.
In the meantime, More than 2,000 CME Bitcoin options contracts expiring at the end of this year show a net bias towards short positions. In other words, traders have been anticipating further declines for the BTC price.
“Traders see the possibility of Bitcoin sliding towards $10,000 or $15,000, but anything below that is a low probability,” said Nick, an analyst at Ecoinometircs.
As Cointelegraph reported, the $10,000 to $14,000 zone remains an area of interest for a potential price bottom if a breakout from current levels occurs.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. All investments and operations involve risk, so you must carry out your own research when making a decision.