Hallo Traders today I would like to talk about the bear market and what we can expect in the coming months.
So let's begin
Bitcoin entered a bear market. A drop below the 200-session moving average on a weekly interval has been used by speculators for many decades to determine whether an asset is in a downtrend or an uptrend. Bitcoin broke that support by slipping below $ 22,000. Nobody knows exactly how much time the Bitcoin price will continue to move in a downtrend and when it is worth considering accumulations. I will try to consider the two most likely scenarios that will shed more light on the duration of the 'cryptocurrency winter'.
Long bear market
In the first scenario, which takes into account the cyclical nature of the cryptocurrency market, we can consider the underlying decline in Bitcoin for another 7 months. This does not mean, of course, that the price will go down every day all this time. Such a scenario may be favored by the so far retained regularity related to halving cycles and the persistent fatal sentiment on stock indices with which Bitcoin correlates:
Halving (halving supply and decreasing the value of the miners' rewards) occurs approximately every 4 years. The previous halving dates are:
November 28, 2012 (new price peak in March 2013)
July 9, 2016 (new price peak in May 2017)
May 11, 2020 (new price peak in December 2020)
The average time from halving to breaking the new price peak so far has been on average around 7 months, and the gains have continued for another 8 months. Assuming that the bear market in the cryptocurrency market has continued since the peaks in November 2021, based on previous cycles, we should now observe declines for another year. The price of Bitcoin tends to rise before halving 'in anticipation of the event'. Currently, halving falls around June 2024, which means that with the cyclicality maintained, we should begin to observe slow increases at the earliest at the end of 2022 and the beginning of 2023.
For a long time, Bitcoin has been correlating with the NASDAQ index and the valuations of stock indices, which results from the greater involvement of institutions and the diversification of cryptocurrency investors, whose decisions are tormented by emotions resulting from the concerns specific to financial markets;
Markets experienced a shock in 2022 related to the tightening of monetary policy by central banks and 'the end of the era of cheap money'. They were also shaken by other events, such as the huge crisis in China, the war in Ukraine, problems in supply chains or the raw material crisis.
At the same time, central banks such as the FED or the ECB are only at the beginning of the interest rate hike cycle, and the US economy continues to send information about record inflation and poor consumer condition. Nearly 75% of the CEO of S & P500 companies is preparing for the recession scenario, which he warned against, among others. President of JP Morgan Jaimie Dimon, Elon Musk but also powerful institutions such as the World Bank or the International Monetary Fund. Bank of America forecasts S & P500 to drop to 3,200 points in a recessionary environment;
The decline in the cryptocurrency market was "helped" by such events as the bankruptcy of Luna, postponing the transformation to version 2.0 and problems with the Ethereum network, fears around Tether and stablecoins, as well as a decline in trust in losing 'DeFi' projects or decentralized financial platforms such as Celsius;
Further declines of the Bitcoin correlating with indices would have to take place with simultaneous declines in indices, which, although it seems to be an abstraction after such a disastrous beginning of the year - is very possible in the face of crises affecting the financial market and a radical change in the position of central banks, which since 2020 have been recklessly printing record amounts money;
In the face of such a disastrous start, a rebound in indices in the second half of the year is still likely. This is confirmed by the data - after such a terrible start the stock indices tended to rebound in the second half of the year almost every time;
The rebound in stock exchanges may lead to an increase in Bitcoin's price and a return of positive sentiment to risky assets, which have been hit hard for six months. Then, the increases in the cryptocurrency market may start much faster, and the current 4-year cyclicality may be broken.
Is a short bear market the most likely scenario right now? Although cryptocurrency investors would like to believe it, this scenario is currently unlikely due to problems piling up on financial markets, risk aversion and the position of central banks. Today's FED interest rate decision will shed some more light on whether the Federal Reserve intends to give the markets any lifeline or focus on fighting inflation without looking at bleeding indices. Further declines in the S & P500 and Nasdaq will support a long bearish scenario. Additionally, the potential 'win with inflation' and easing monetary policy may coincide with the future halving cycle in 2024. This could be a real engine for cryptocurrency growth and a new bullish cycle.
So let's begin
Bitcoin entered a bear market. A drop below the 200-session moving average on a weekly interval has been used by speculators for many decades to determine whether an asset is in a downtrend or an uptrend. Bitcoin broke that support by slipping below $ 22,000. Nobody knows exactly how much time the Bitcoin price will continue to move in a downtrend and when it is worth considering accumulations. I will try to consider the two most likely scenarios that will shed more light on the duration of the 'cryptocurrency winter'.
Long bear market
In the first scenario, which takes into account the cyclical nature of the cryptocurrency market, we can consider the underlying decline in Bitcoin for another 7 months. This does not mean, of course, that the price will go down every day all this time. Such a scenario may be favored by the so far retained regularity related to halving cycles and the persistent fatal sentiment on stock indices with which Bitcoin correlates:
Halving (halving supply and decreasing the value of the miners' rewards) occurs approximately every 4 years. The previous halving dates are:
November 28, 2012 (new price peak in March 2013)
July 9, 2016 (new price peak in May 2017)
May 11, 2020 (new price peak in December 2020)
The average time from halving to breaking the new price peak so far has been on average around 7 months, and the gains have continued for another 8 months. Assuming that the bear market in the cryptocurrency market has continued since the peaks in November 2021, based on previous cycles, we should now observe declines for another year. The price of Bitcoin tends to rise before halving 'in anticipation of the event'. Currently, halving falls around June 2024, which means that with the cyclicality maintained, we should begin to observe slow increases at the earliest at the end of 2022 and the beginning of 2023.
For a long time, Bitcoin has been correlating with the NASDAQ index and the valuations of stock indices, which results from the greater involvement of institutions and the diversification of cryptocurrency investors, whose decisions are tormented by emotions resulting from the concerns specific to financial markets;
Markets experienced a shock in 2022 related to the tightening of monetary policy by central banks and 'the end of the era of cheap money'. They were also shaken by other events, such as the huge crisis in China, the war in Ukraine, problems in supply chains or the raw material crisis.
At the same time, central banks such as the FED or the ECB are only at the beginning of the interest rate hike cycle, and the US economy continues to send information about record inflation and poor consumer condition. Nearly 75% of the CEO of S & P500 companies is preparing for the recession scenario, which he warned against, among others. President of JP Morgan Jaimie Dimon, Elon Musk but also powerful institutions such as the World Bank or the International Monetary Fund. Bank of America forecasts S & P500 to drop to 3,200 points in a recessionary environment;
The decline in the cryptocurrency market was "helped" by such events as the bankruptcy of Luna, postponing the transformation to version 2.0 and problems with the Ethereum network, fears around Tether and stablecoins, as well as a decline in trust in losing 'DeFi' projects or decentralized financial platforms such as Celsius;
Further declines of the Bitcoin correlating with indices would have to take place with simultaneous declines in indices, which, although it seems to be an abstraction after such a disastrous beginning of the year - is very possible in the face of crises affecting the financial market and a radical change in the position of central banks, which since 2020 have been recklessly printing record amounts money;
In the face of such a disastrous start, a rebound in indices in the second half of the year is still likely. This is confirmed by the data - after such a terrible start the stock indices tended to rebound in the second half of the year almost every time;
The rebound in stock exchanges may lead to an increase in Bitcoin's price and a return of positive sentiment to risky assets, which have been hit hard for six months. Then, the increases in the cryptocurrency market may start much faster, and the current 4-year cyclicality may be broken.
Is a short bear market the most likely scenario right now? Although cryptocurrency investors would like to believe it, this scenario is currently unlikely due to problems piling up on financial markets, risk aversion and the position of central banks. Today's FED interest rate decision will shed some more light on whether the Federal Reserve intends to give the markets any lifeline or focus on fighting inflation without looking at bleeding indices. Further declines in the S & P500 and Nasdaq will support a long bearish scenario. Additionally, the potential 'win with inflation' and easing monetary policy may coincide with the future halving cycle in 2024. This could be a real engine for cryptocurrency growth and a new bullish cycle.
Comment:
Comment:
Hello traders, it looks like we have a repeat of the staircase from the previous decline, if this happens, we can count on 16k dollars for one bitcoin in mid-July
Comment:
Well we are 7 months away and the scenario on the chart is coming true more and more, do you still think there is a chance for any rally this year?? (leave a comment), a price break even to 35k will not indicate a bullish trend. I invite you to watch the chart in the coming months
Comment:
Comment:
But I think it will take longer, logarithm is logarithm
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