Do not index
Do not index
The 20-Month MA
The 20-Month MA has been a useful historical indicator for understanding where BTC is in the market cycle, how close it is to a generational bottom, and also what to expect in terms of a bottoming out formation.
Historically, BTC tends to retrace -46% to -63% below the 20-Month MA:
- 2015 —> 63%
- 2019 —> -53%
- 2020 —> -46%
- 2022 —> -57% thus far.
Thus far, BTC has retraced -57% below the MA, which is on the deeper end of average.
Based on these historical tendencies, the downside is becoming increasingly limited.
What about time-wise?
How much time does BTC tend to spend under the 20-Month MA until BTC finds a bottom?
Historically, BTC tends to spend a few days to a few months below the 20-Month MA:
- 2015 —> 122 days (4 months)
- 2019 —> 30 days (1 month)
- 2020 —> a few days
- 2022 —> 60 days thus far (2 months)
History suggests that BTC should find a bottom within the next two months, the latest by September 2022.
But can historical trends be trusted with what’s going on in the macro sense?
As a Technical Analyst, I tend to focus more on the charts and ignore what goes on in the fundamental, macro sense.
Purely based on the charts, BTC has limited downside and a limited time window for a bottom to form.
But extreme fear and maximum pessimism tend to dominate our thinking in market conditions such as these and so people prefer to “wait and see” which is a perfectly legitimate approach to investing as well.
The 20-Month MA represents the ~$41000 price point and once BTC is able to break beyond that level and successfully retest it as a support, then the Bull Market would be confirmed to have returned.
Until then, anything below the 20-Month MA will likely represent price points that if dollar-cost-averaged into will generate great ROI for long-term investors in the coming years.
A Story Of Three Triangles
Historically, Bitcoin has formed three macro Descending Triangles.
Once the bases of those Descending Triangles have formed, price has accelerated in the downtrend in search of a generational bottom.
Once that bottom has been reached, price would then consolidate for as long as it took for price to recover back above the Macro Downtrend line.
Currently, it appears that BTC is in the acceleration phase of its downtrend, following the Descending Triangle breakdown.
BTC is searching for an absolute bottom.
How much lower could price go?
Historically, BTC has retraced -50% to -65% below the Descending Triangle bottom:
Thus far, BTC has retraced -49%, which means that BTC has already tagged a historical level at ~$17000.
This perspective however suggest price could drop as much as an extra -15% to meet the -65% historical retracement mark which would tag the ~$11800 level which would in total round up to a -84.5% Bear Market correction ( i.e. an average historical Bitcoin Bear Market correction).
The other thing about these Three Triangles is that after the acceleration phase where the downtrend picks up momentum in an effort to find a generational bottom, price then spends time in a consolidation phase which tends to be lengthy.
After a generational bottom has been established, BTC has spent anything between 121 to 181 days consolidating until BTC breaks out beyond the Macro Downtrend.
BTC hasn’t yet found its bottom and with only a few days left in the month, it’s unlikely BTC will find it in June - but let’s assume it does for the sake of discourse:
If it takes 121-181 days for price to finish up its bottoming phase and consolidation phase, BTC could attempt to breakout beyond the Macro Downtrend in October 2022 (121 days scenario) or December 2022 (181 days scenario).
Generally however, the Macro Downtrend breakout will be the confirmation signal for a new Macro Uptrend.
Until then, price still needs to give us a a) bottom to end the downtrend acceleration phase and b) a period of lengthy consolidation which is needed to bring us closer to the Macro Downtrend.
Another way to look at this is through the lens of the Halvings:
BTC tends to breakout beyond the Macro Downtrend 366-396 days before the next upcoming Halving.
In which case BTC could breakout in March 2023 or April 2023.
Which means that there is plenty of time still for BTC to enjoy lengthy consolidation until that new Macro Uptrend begins via a breakout beyond the Macro Downtrend.
Until then however - Bitcoin is still in search of a generational bottom.
Thank you for reading.
P.S.
Many people have been frequently asking me this question:
“How can I make the most of this Bear Market?”
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Take the time to do both things.
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