New analysis shows that Bitcoin price may drop further in Q4 of 2022. But the new 2023 could be a year when the bulls take the stage.
According to the majority of investors, Bitcoin is in the hands of bears
Well-known cryptocurrency market analyst Benjamin Cowen surveyed his more than 700,000 followers on Twitter. In the survey, “How do you feel as we enter Q4 for BTC?” asked the question. Below that, he left 2 response options: rise or fall. 11,299 attendees voiced their feelings, ready for more than one drop.
These kinds of results are emerging even though more and more indicators are showing that we are close to the bottom. On the other hand, there are strong arguments pointing out that the absolute bottom of this bear market is not coming now.
Here is the duration of Bitcoin bear markets
Another crypto analyst, Rektcapital, has published data on the duration of historical bear markets. According to his calculations, the period in which Bitcoin has steadily lost value in this cycle has reached a length comparable to the previous bear markets:
- 2013-2014 : 413 days from top to bottom – 86% decrease from ATH
- 2017-2018 : 364 days from top to bottom – 84% decrease from ATH
- 2021-2022 : 333 days from peak so far – 74% drop from ATH so far
“These numbers indicate that a BTC bottom should happen in the next 1-3 months,” Rektcapital says.
A closer look at Bitcoin’s 3-month logarithmic chart confirms the analyst’s observations. After each BTC historical high, we see that the bear market continues for several quarters. Also, it usually reached an absolute bottom in the fourth and early first quarters, about a year after the top.
It is worth noting that the bull market does not start quickly after reaching the bottom, but the accumulation continues for 2-3 more quarters. This means that even though the bottom of the bear market has already formed or is about to be reached, large increases should not be expected in the first months of 2023.
Exits from exchanges – Coinbase event study
There are many signals that the Bitcoin market is currently in the process of bottom formation and accumulation. Many relate to activities on exchanges led by Coinbase. Based on the information released this week, we could see increased BTC outflows occur. From their point of view, the Bitcoin price has reached a valuable reinforcement level that historically points to absolute bottoms.
The first chart published by IIICapital shows how the volume of Bitcoin on Coinbase has been falling steadily since the start of the bull market launched in Q4 2020. In a different form, the reversal of the trend in BTC price and its 2022 declines now did not happen. The turnover from June to date alone shows a clear calm on the blue chart and the relative stability of the BTC supply on Coinbase.
In this middle, the second chart published by Ki Young presented an argument that the bear market is not over. Based on the so-called exit OWAP for Coibase, we can see that BTC price is in a long-term foothold today.
The orange line shows the approximate entry price of institutional investors buying through Coinbase. If it’s true that institutions play a key role in the cryptocurrency market, reaching the light green accumulation area is a base signal.
Bitcoin cycle dynamics and similarities to 2019
Another strategy for determining the phase of the current bear market is to try to find fractal similarities with the current price action mid-2018-2019 bull market. A different analysis on this issue was recently provided by analyst StockmoneyL, who found parallels in the dynamics of the last 3 cycles.
According to the analyst, Bitcoin is currently in a BUY tier of about six months. It has historically proven to be the period with the least risk and greatest opportunity for future increases. The optimistic estimate of this analysis is that the $19,000 level will remain as reinforcements and the bottom has been reached.
In another tweet, the same analyst juxtaposed a fractal of the BTC price chart for late 2018-2019 and today’s price action. Amidst the many similarities, striking is the sharp fall from the 40-50% foothold and the formation of the bottom.
In both cases, it can be noted that the initial low is followed by a higher low on the chart. This was followed by a consolidation phase of several months, followed by more dynamic increases. If this scenario were to repeat anymore, Q4 2022 would be an era of consolidation and accumulation. The bull market, however, may begin in the first quarter of 2023.
Early base signals
The last way to find signs of the end of the bear market and the reversal of the trend on the Bitcoin chart is with long-term technical indicators. One of them is the monthly MACD, which provides a very clear trend reversal signal in the previous 2018-2019 bear market.
This assay was mentioned in yesterday’s tweet by @el_crypto_prof, who compared MACD readings in February 2019 and October 2022. According to the analyst, the change of the negative bar on the MACD histogram from dark red to light marked the end of a bear. A similar signal could be produced this month if Bitcoin at least holds its current level around $20,000. However, we won’t know until the end of this month.
Another signal is provided by the weekly RSI indicator, whose comment was just tweeted by the analyst. According to him, the weekly RSI’s visit to the very buy zone below 30 was a sign of the market floor.
This occurred in the areas marked below (yellow and red). It is worth noting that the lowest RSI value from all three events occurred in June 2022. However, the always slow rising indicator has been accompanied by the sideways movement of Bitcoin price and several months of consolidation. This also strengthens the thesis that the bull market will start again in the first quarter of 2023 at the earliest.