Why the belief of a recovery is possible in Bitcoin (BTC).
Back in December 2013, Bitcoin reached a relative all-time high of approximately $1,200 USD. This was insane to think internet funny money could be valued that high. Just one year before Bitcoin reached its high, it was valued at $10 USD… That’s a 120x in just a year.
This is unbelievable to me, because four years later. Bitcoin reached its all-time high of approximately $20,000 USD. But, for today’s analysis, we are not interested in drawing lines connecting the highs. Or, finding triangles in the charts. Today we are interested in what is happening between the highs.
It is almost as if; they have coded these cycles into Bitcoin’s core. But that’s a topic for another article. Today, I will analyze what happened with price action in relation to the 50 MA & 200 MA on the BTCUSD 1D BITSTAMP chart in 2013/2014 and tell you what this says about Bitcoin in 2020.
Let’s start out by observing the candles and how they react to both the 50 MA & 200 MA.
The first thing that I notice is after the relatively high at $1,200 USD was, Bitcoin quickly retraced to the 50 MA and had a dead cat bounce off of that level. However, we failed to continue the rally higher, forming a lower high. We then came back down to the 50 MA and consolidated around that line.
After about a month and a half of staying around that moving average, Bitcoin fell below it. The price sat between the 50 MA & 200 MA. The price attempted to retest the 50 MA, but it rejected us.
After Bitcoin got rejected from the 50 MA, we fell below the 200 MA and the famous death cross occurred. This confirms that the market sentiment has switched. The once bright bull market turned to a bloody bear market.
Bitcoin retested the 50 MA twice before we broke through. When we finally broke through, it rejected us at the 200 MA. From that point, the bears were in control of the market.
Bitcoin had another death cross. From this point, the candles would stay below the 50 MA, occasionally breaking it, but quickly falling back below it. Bitcoin would ride this trend down to a low of approximately $150 USD.
Once again, Bitcoin stayed below the 50 MA, testing it twice before it broke through. After this, it moved sideways moving above then below the 50 MA. Bitcoin broke the 50 MA once again then broke the 200, MA. The price rallied higher, causing a golden cross. This was another shift in sentiment inside the market. Bringing Bitcoin hope once again.
Except for, something unexpected happened. Bitcoin once again fell below the 50 MA, then soon after fell below the 200 MA. It formed a higher low and moved sideways for a while. This caused another death cross. The price didn’t fall through, instead; It broke both the 50 MA and 200 MA continuing the rally higher.
This caused another golden cross and confirmed the bull market that sent Bitcoin’s price up to $20,000 USD. Bitcoin would not fall below the 200 MA until the next bear market that took place after the all-time high on $20,000 USD in December 2017.
Now let’s look at what happened after Bitcoin reached an all-time high of approximately $20,000 USD.
Looking at the chart, we see the same pattern that occurred in 2013/2014. Bitcoin’s price hits it’s all-time high then quickly retraces to the 50 MA. After this, the price bounces off of the 50 MA, but the price cannot recover to the previous high forming a lower high.
After we failed to make higher-high, Bitcoin’s price fell below the 50 MA. This sent the price down to test the 200 MA. Again, just like what we saw in 2013/2014, the price bounced off of this level to the 50 MA.
Bitcoin got rejected at the 50 MA and moved further down back below 200 MA. The sentiment once again switched, it was the start of a bloody bear market. Like what followed the 2014 death cross. Bitcoin’s price would stay below the 50 MA. Occasionally, Bitcoin’s price would break through the 50 MA. If this happened, the price would get rejected at the 200 MA and fall back below the 50 MA.
After months of consolidating below the 50 MA, Bitcoin had one last push down to a low of approximately $3100. This movement is eerily similar to what we saw back in 2014. Once again, Bitcoin bounced off of the low to retest the 50 MA. Just like the price broke the moving average, then fell back below it.
We then had a single green candle breaking directly through the 200 MA. This changed the sentiment again, ending the bloody bear market and placing disbelief into the market. We continued the rally up to approximately $14,000. This gets me asking a lot of questions.
I do not think this recovery was at all intended. There was a lot of fear of missing out in the market. This was the fear of missing the next big rally for Bitcoin. The people who were calling for $1000 — $2000 Bitcoin poured in buying at higher prices.
This led people to speculate that Bitcoin would test new all-time highs just like that. Greed drove the price so high. With this in mind, we get an idea of the greed that will enter the market this next cycle. Sending Bitcoin to astronomical levels. As a result, many people will get greedy and lose a lot of money.
Back to the analysis. What we see is Bitcoin’s price once again came down and found support along the 50 MA. It then bounced off to form a lower high. We then fell below the 50 MA and consolidated beneath the 50 MA until we fell lower.
We ended up falling below the 200 MA, which caused a death cross in the market. But wait a minute… Didn’t we see this happen in 2014? Yes, this exact thing. We bounce off at approximately $7,100 USD to retest the 200 MA. Again, we got rejected sending us to lower lows, forming a bottom at approximately $6,500.
So, where are we now? We are now above both the 50 MA & the 200 MA. In the next week, we will see the infamous golden cross. This will confirm our next rally. This past rally ended our 3 to 4-year cycle through The Wall St. Cheat Sheet (Market psychology).
“Past performance is no guarantee of future results.”
The past cannot tell us how high Bitcoin’s price will go. It will not tell us when it will get there. What it can show us, is when momentum is entering back into the market. That is what I believe is so special about Bitcoin‘s price action in relation to these two moving averages.
From what has happened in 2013 & 2014, I can say with a 90% certainty. Bitcoin is in the hope phase of market psychology. Most people in the market in a little while will believe that recovery is possible in Bitcoin.
I hope you enjoyed reading this article! If you enjoyed this article, please follow me on medium and applaud this story 🙂
Best regards,
Benjamin
Published at Tue, 11 Feb 2020 22:46:07 +0000
{flickr|100|campaign}