Here’s something worth noting about bitcoin . Beneath all the noise of daily price swings,
To the dismay of the bulls, it has not yet broken out, suggesting that the overall bear market may not be over, and the recent bounce to $75,000 from $65,000 could be a temporary recovery.
The indicator
These are two lines on the price chart. That’s it, no complex formula is needed, an analysis of blockchain data is needed.
These two lines represent the average price of bitcoin over the last 50 and 100 weeks. They act as simple moving averages, showing short- and long-term trends in the price of bitcoin.
Most of the time, the 50-week average is above the 100-week line. That is the natural state of markets that trend upward over time, as is the case with bitcoin.
But occasionally, during periods of heightened fear, when selling is relentless and sentiment has collapsed, the 50-week average falls below the 100-week average. This crossover is known as a bear market signal.
It has happened three times in the history of bitcoin. Each time, it has coincided with the end of a bear market, marking major price lows that have not been revised since.
In other words, it has been a contrarian indicator, ironically marking a bottom rather than a deeper slowdown.
Three times, three funds
Look at the vertical lines on the chart going back to 2015. They mark the three bearish crossovers: April 2015, February 2019, and September 2022. Each of them occurred near the bottom phase, not exactly at the bottom, but within the same range.
In 2015, BTC was dismissed as a failed experiment. Then the crossing occurred. BTC subsequently rose from $200 to almost $20,000 in late 2017. A similar pattern developed after the early 2019 crossover.
The crypto winter of 2022, characterized by several bankruptcies and scams, shattered investor confidence. The bearish trend, however, lost steam after the crossover occurred in September. BTC bottomed in recent months and then posted a rally to $126,000 in October 20205.
Each of these bull runs generated returns far exceeding those of stocks and other major asset classes.
What are you saying now?
As of April 17, the crossing has not occurred.
Bitcoin has declined sharply from its October all-time high of over $126,000 to around $75,000, briefly reaching $60,000 in early February. As a result, the two averages are getting closer, but the 50-week average still remains above the 100-week average.
The bottom line: If history is any guide, the overall bear market may remain intact and worsen before bottoming out. It also means that the recent bounce towards $75,000 is likely a temporary recovery rather than the start of a full-blown bull market.
That said, historical patterns are just that – patterns – and do not guarantee future results. If US stocks, already at record levels, continue to advance, institutional demand for Bitcoin ETFs could strengthen, potentially supporting a price rally.
