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Let’s quickly recap some of the most important insights about Bitcoin Bull Market dips and corrections.
Bitcoin Bull Market Corrections (2016)
In 2016, Bitcoin experienced three dips of -14% to -16% early on in the year and two major corrections of -24% and -40%:
In 2016, these dips and/or corrections lasted at least a week, at most over a month (i.e. 47 days) and generally a few weeks (two to three weeks).
The deepest and longest Bitcoin Bull Market correction occurred on the cusp of Quarter 2 and Quarter 3.
Bitcoin Bull Market Corrections (2017)
In 2017, there were about 5-6 Bitcoin Bull Market corrections ranging from -30% to -40%:
These corrections were short, averaging 16 days, most generally lasting a few weeks, with the deepest and longest lasting over one month (i.e. 34 days) which occurred on the cusp of Quarter 2 and Quarter 3:
Aside from the Bull Market Corrections, Bitcoin also experienced 12 Bull Market dips, ranging between -10% to -25%:
Bitcoin Bull Market (2021)
By looking at the 2016 and 2017 Bitcoin Bull Markets we’ll notice a few recurring themes:
- End of Quarter 1/beginning of Quarter 2 tend to be relatively uneventful for Bitcoin
During this time, BTC is either retracing or consolidating/upticking very slowly.
Generally, this period is relatively uneventful for price. This was not only the case in 2016 and 2017, but it is looking to be the case this year as well.
- Historically, Quarter 2 is extremely bullish for Bitcoin
In 2016 and 2017, Bitcoin enjoyed periods of fantastic price expansion.
Given how bullish BTC is during these months, Altcoins may shed valuation during this time, but will be strongly rebounding during periods of cooling down from BTC in its Q2 uptrend.
- End of Quarter 2/beginning of Quarter 3 are where Bitcoin experiences its deepest and longest Bull Market correction
In 2016, BTC retraced -40% in 46 days and in 2017 it retraced -39% in 34 days around this very period.
A deeper retrace is likely ahead but not on this current pullback; most likely around the end of Q1/beginning of Q2.
- In 2017, Bitcoin experienced a -29% three week retrace at around the same time (end of Feb, early March).
Bitcoin tends to pullback near the end of its Quarters. While in 2016 this would often translate into dipping price action, in 2017 this has resulted in strong pullbacks.
End of Quarters are a hotspot for Bitcoin pullbacks and the fact that Bitcoin is now pulling back -26% in 8 days isn’t surprising by standards of history.
Bitcoin’s Price Today (2021)
This is the Bitcoin price action for 2021.
Out of the 59 days of 2021 thus far, Bitcoin has spent 63% of its time in uptrends.
Only -37% of 2021 has been spent in retraces.
Historically, BTC spends its Bull Market years mostly in uptrends (74% of 2016, 73% in 2017) so BTC isn’t far off from that historically recurring tendency.
And while Bitcoin experienced 12 dips in 2017, BTC has already experienced 3 dips in 2021: -21%, -16%, and -16%.
But only one major correction of -30% in January.
Currently, BTC is in the process of an 8 day -26% pullback but it still isn’t clear if this is just a dip or whether it is now a correction.
Bitcoin is currently recovering after the sell-off from yesterday and so we’ll likely see a relief rally in the short-term. This relief rally will give us greater insight into what to expect going forward.
It’s important to watch out for a Lower High relative to $58,000 should BTC form one on its recent recovery.
That said, based on previous cycles and Bull Market corrections in those cycles, there is nothing to be alarmed about.
Stock To Flow Model Deviations
The controversial Stock-To-Flow model has been a force in this market as it has been able to reliably outline the projected path for Bitcoin’s price action, no matter the market conditions, no matter how extreme.
During the March 2020 sell-off, the S2F model still remained valid, accommodating for such extreme downside volatility with its downside volatility band.
In the same way that the S2F has historically accommodated for upside over-extensions in BTC’s price beyond the black/brown Stock-To-Flow line.
After all - periods of outsized financial opportunity exist in periods of downside deviation below the volatility bands of the S2F in the same way that outsized periods of financial risk exist in the over-extensions in BTC’s price beyond the S2F line.
Overall, Bitcoin’s price is perfectly following the S2F model.
But the real merit behind the S2F flow lies in the deviations beyond it. Since the S2F is still perfectly following price (or rather price is still following the S2F), BTC’s price still hasn’t reached a period of maximum financial risk.
It hasn’t yet overextended beyond the S2F line. It’s just following it perfectly.
The colours on the S2F evidence this well.
Notice how each BTC Bull Market peak occurred beyond the S2F line and when the S2F printed a green colour (with the obvious exception of the earlier market cycle where little data existed).
Bitcoin is currently in its orange phase, which has historically preceded further exponential upside.
According to the S2F model - BTC hasn’t entered a period of maximum financial risk and therefore the Bull Market remains in full force.
More Data Science Models
The 200 Week Moving Average Heatmap
The 200 Week Moving Average Heatmap also suggests this is not the beginning of a Bear Market for Bitcoin.
Yes, Bitcoin has considerably advanced in its current uptrend as evidenced by the green dot.
But green dots have preceded further upside when in an uptrend (Green dots after a red-spotted corrections precede downside continuation in a new Bear Market).
The 200WMA hasn’t even reached its more yellow spot, not to mention red spots, which are the ultimate indicator for an overextended Bitcoin Bull Market.
Closing Thoughts
Bitcoin is currently in the process of its second deeper pullback (though it’s unclear whether it indeed is a correction or just a dip at this time).
Historically, BTC tend to experience 5-6 major corrections during a Bull Market, with the most extreme one occurring mid-year.
The fact that BTC is only in the process of a potential second retrace, with the most extreme correction still yet ahead, showcases that price is still early on in its uptrend.
Data science models suggest this as well - talking about the uptrend ending when it is still clearly in full force seems a bit premature, especially when there are no technical signs or data-scientific findings to support the end of the Bull Market.
The Bitcoin Bull Market lives on until proven otherwise.
Thank you for reading.