Has Bitcoin Bottomed? 2019 Outlook and Hypotheticals
Updated
Have we already seen the 2019 low? There is a very good chance that we have. However, I do not believe we are out of the woods yet.
In my last post, I challenged the notion that Bitcoin hasn't yet bottomed, and that we could go lower based on a comparison to the 2014-2015 market cycle.
While I don't place too much importance on perfectly identifying bottoms & tops, as it shouldn't affect trading strategy too much, it is very fascinating to look for clues as to where we are in the cycle. This information can also be extremely beneficial for our long-term outlook with regard to placing long positions and maximizing returns. I have come to realize that it is more important to identify trend, than it is to time perfect entries and exits.
Looking at the past market cycle from a slightly different lens, we can see two major moving averages that outlined support and resistance on the weekly time scale. We can see that the bottom of the 2015 bear market flirted with the 200 week moving average (purple line) and touched it several times before rising to test the 50 week moving average, before ultimately being rejected there, and once again trying that 200 week moving average one last time before entering a new cycle.
What happened next is very interesting and perhaps may offer us some valuable insight:
The 50 & 200 MA consolidated and squeezed together into a tight range until BTC price went on about a 2 month rise, clearly establishing its trend & entry into a new market cycle and out of a bear market.
Will this exact sequence occur similarly to conclude the 2018-2019 market cycle and enter a new bull market?
It doesn't' have to - but it at least gives us something to look out for in determining trend change. For me to be confident in saying the bear market is over, I would like to at least see the 50 week moving average turn into support.
Fundamentally, there are several key variables that are still up in the air.
Namely, I believe we still have way too many coins/ projects still in the space without clear-cut use cases and true value. Referencing the Dot.com bubble, the "crash" or bear market was at least a significant method of cleansing the market of projects/stocks that lacked real value, and weren't built to last in the new economy. According to Coinmarketcap.com we still have over 2,000 cryptocurrencies. Thats roughly 1,900 more projects than I feel comfortable reading about - let alone trading.
Additionally, we are waiting for institutional clarity on some more trustworthy product offerings such as from BAKKT, Fidelity & a pending ETF approval.
In my last post, I challenged the notion that Bitcoin hasn't yet bottomed, and that we could go lower based on a comparison to the 2014-2015 market cycle.
While I don't place too much importance on perfectly identifying bottoms & tops, as it shouldn't affect trading strategy too much, it is very fascinating to look for clues as to where we are in the cycle. This information can also be extremely beneficial for our long-term outlook with regard to placing long positions and maximizing returns. I have come to realize that it is more important to identify trend, than it is to time perfect entries and exits.
Looking at the past market cycle from a slightly different lens, we can see two major moving averages that outlined support and resistance on the weekly time scale. We can see that the bottom of the 2015 bear market flirted with the 200 week moving average (purple line) and touched it several times before rising to test the 50 week moving average, before ultimately being rejected there, and once again trying that 200 week moving average one last time before entering a new cycle.
What happened next is very interesting and perhaps may offer us some valuable insight:
The 50 & 200 MA consolidated and squeezed together into a tight range until BTC price went on about a 2 month rise, clearly establishing its trend & entry into a new market cycle and out of a bear market.
Will this exact sequence occur similarly to conclude the 2018-2019 market cycle and enter a new bull market?
It doesn't' have to - but it at least gives us something to look out for in determining trend change. For me to be confident in saying the bear market is over, I would like to at least see the 50 week moving average turn into support.
Fundamentally, there are several key variables that are still up in the air.
Namely, I believe we still have way too many coins/ projects still in the space without clear-cut use cases and true value. Referencing the Dot.com bubble, the "crash" or bear market was at least a significant method of cleansing the market of projects/stocks that lacked real value, and weren't built to last in the new economy. According to Coinmarketcap.com we still have over 2,000 cryptocurrencies. Thats roughly 1,900 more projects than I feel comfortable reading about - let alone trading.
Additionally, we are waiting for institutional clarity on some more trustworthy product offerings such as from BAKKT, Fidelity & a pending ETF approval.
Note
**This chart is on the Daily timeframe - the prior chart was Weekly**
Currently Bitcoin is looking to make its first bullish Golden Cross (50-day moving average crossing up over the 200-day moving average) since the start of the last bull run back in 2015.
Last time that happened, Bitcoin continued to register higher highs all the way up until the December 2017 peak. The 50-day moving average (golden line) stayed above the 200-day moving average (purple line) the entire time before finally crossing under in March-April 2018 which clearly registered the early part of this cycle's bear market.
The Golden Cross essentially represents a shorter-term moving average moving above a longer-term moving average, thus indicating a change in momentum.
The caveat with using the Golden cross as a ‘buy’ signaling indicator is that moving averages are considered “lagging” indicators, which means they are simply reflecting data that already happened, and not necessarily what is going to happen.
Looking back to the 2014-2015 Bitcoin bear market, the first time the 50-day moving average attempted to overtake the 200-day moving average turned out to be nothing more than a temporary false alarm.
Observing what transpired in the red rectangle, we can see that price spent roughly a month and a half above both moving averages with the 50 MA briefly crossing above the 200 MA before price tanked back underneath both levels, and the 50 submerged once again under the 200. This event constitutes the Golden Cross acting temporarily as a false signal, since price action could not continue directly into bullish territory.
Interestingly, price retraced 78.6% from its January 2015 bottom (yellow Fibonacci level).
The bounce that followed propelled bitcoin out of the bear market & definitively into the next cycle.
Assuming BTC can reach resistance around $5,800- 6,000 this time around, that same 78.6% retracement from the December low would pull us back to around $3,700.
Mirroring what happened in the last Bitcoin cycle, one possibility (if history were to repeat, of course) is that the 50 MA can poke its head up above the 200 MA for a brief period until BTC hits major resistance and comes back down to test key support areas.
The current bullish setup will attract buyers and allow the market to move in the short term.
If it does play out similarly to the 2015 scenario, there would end up being an extension of this bear market, and we would theoretically have at least one more solid buying opportunity before continuing into the next cycle.
In sum, while there is reason to be Bullish in both the short & long-term, it will be key to proceed with caution and exercise disciplined risk management with the entire market from here to the Btc ~$6,000 area. I do anticipate seeing some exciting movement from the rest of the market in the meantime and will look to take advantage accordingly.
Note
Comparing trendlines from 2014-15’ to 2017-19’ market cycles provides a fascinating perspective. While the credibility of trendline comparisons remains up for question, we can see that at the end of the last bear market, Btc price broke through the trendline resistance and then later retested it as support. This interestingly aligns with my last idea post regarding the time frame for the bullish cross (50 ma / 200 ma) with an ensuing price retrace of 78.6%.
In 2015, that 78.6% price retracement happened to have perfectly touched the trendline support – then at $197.
A 78.6% retracement this time around would imply Bitcoin going back to try the $3,600-3,800 range which is also roughly in the ballpark of where that trendline may patiently remain in the meantime.
Note
Note
Price has once again gone parabolic as outlined by the curved green lines.
It might be worth recalling what happened after the last time price action took the shape of a steeply curved parabola, as shown underneath the solid, diagonal purple line.
Taking a look above this move at important levels that should in theory act as heavy resistance, meaning psychological barriers where price should struggle to break & stay above:
Each peak identified by the yellow arrows can be seen as a major overhead resistance level.
Our first relevant horizontal resistance, as recognized by the dotted purple line, is right around the 7,500 level.
Looking at the major Fibonacci retracement levels from the very top of the 2017 Bull run, down to the December 18’ bottom, the 23.6% retrace level around 7,067 (Bitstamp chart) is holding so far as a very strong resistance. This means that from Bitcoin’s all-time-high to its December bottom, price has resurged 23.6% of the way, which validates the significance of this level.
Note
The two previous Bitcoin market cycles actually do show a parabolic advance sparking the beginning of each ensuing bull market:If you missed long-term buy opportunities offered before this move up, the next best entry point could be presented in the correction that follows this move.
In 2012 and 2015, the .618 Fib retrace level acted as prevalent area where price briefly fell back towards, before going on long runs to new successive all-time highs. I will outline where this could be once btc appears to have found its local top from this rise up.
Note
For the short term, it looks like BTC has found its local top around 8,300-8,400.The sideways price action we've seen since then leads me to believe we are in a corrective triangle, which would imply bullish continuation to the upside once it completes. From the entire move up thus far, price has tested the 23.6% retrace level and bounced off rather quickly. In a trending market, this area along with the 38.2% zone are likely markers for retrace before moving further along in the trend -
which in this case is up.
From an Elliot Wave perspective, these corrective triangles usually occur waves 4 of 5. This would imply we are due for at least one more sizable move upwards before any major correction occurs.
Note
Btc broke to the upside as expected.
There is major resistance from $9,200-10,000.
I expect price to struggle to push through that area in the short-to- mid-term. If price does attempt to test that area and fail, that could present a sizable correction in which we can be somewhat patient in looking for favorable re-entry points.
Note
From a momentum perspective, we can see that based on major moving averages (50, 100 & 200) that the major trend for Bitcoin has flipped and is now up. Leading the downtrend all the way to the December low was the 50-day moving average followed by the 100 and then the 200. In March, we saw the 50 MA cross over the 100 MA to the upside, highlighted in the first blue circle. In April, we saw the 50-day moving average cross above the 200-day moving average for the first time since July 2015, representing what’s known as a Bullish Golden Cross (second blue circle). Since then, the gaps between the major moving averages have widened, giving us reason to believe that the overall trend shift has been initiated thus taking us out of the bear market. This can provide us confidence in entering long positions as the price retraces, a strategy otherwise referred to as buying the dip in a trending market. Moving forward, one of two things are inevitable: either price will fall back to meet these moving averages, or they will move up to meet price. Either way, buying opportunities for long-term entries should present themselves within the next several weeks at buyers' discretions.
Note
We are currently right at a major resistance for Bitcoin at $11,400-$11,500. This level has important historical significance as it was tested as both major support and resistance from 2017-2018. This level is also an important Fibonacci level as it represents a 50% retracement from all-time high to the recent bear market bottom. If Bitcoin were to continue its run to the upside, there doesn't appear to be much resistance until around 13.5k. Also important to consider, in a trending bull market, 30-40% corrections are to be expected and could represent ideal buying opportunities. We currently have major psychological support at $9,500 & $10,000.
Note
(See comments below for attached image)Note
This could very well be a possibility as we've seen BTC range sideways for several months now since the major surge from low 3,000's. The apex of the falling blue trendline and the rising pink trendline coincides perfectly with the supposed launch date of Bakkt's Bitcoin futures.
Note
Also notice how volume has declined and maintained (via OBV) since the peak back in June 19', which is characteristic of a bullish correction.Note
This is one viable interpretation of the price action that has transpired since my last post: Strong support around the $7,200 area from the .618 Fib level, as well as the rising (& falling) trend line(s).
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