Comparing Current Action to All Historic BTC Breakouts.
This post is going to take a look at all of the instances in BTC history of there being a major breakout (This is doable, it's not as many as you may think) and compare the action in those breakouts to the action we have now.
Let's first define the action we have now. We can argue all day over different patterns this can be called but there are a few things we can non-subjectively mark out and compare with previous times;
- We know there's been a new high.
- We know time from the low to high and the time from the high to now (We'll use the ratio).
- We know how many lower lows there's been in the drop off the high.
And that's it. Really. From a purely objective point of view it's hard to say we know anything else, but these are things we do know and can always know in previous examples.
We can look and see how many times this has happened and what happened next.
We'll skip out the extreme early days of BTC because the lack of liquidity made it wild and quite meaningless from a TA perspective, but we will look at all the big breakouts from as soon as the chart started to observe structural things we attempt to understand with TA.
1. April 2013 Breakout
This breakout would have to be said to be unlike current times in all ways. The pullback in it was very brief, came before the new high and there was a run away break on the new high. There was no sequence of lower lows. The pullback time relative to the trend time was also far less.
2. December 2016 Breakout
This came off a new high, making it a much more comparable breakout than the previous one. But the pullback and trend was a much sharper and cleaner affair. The pullback followed the convention of two main corrective legs (And a little head fake) and then the uptrend resumed. It also has broken out by this time (Relative to the move from the low).
3. June 2017 Breakout
Could not be said to be very similar in any way. Pullback comes from a bit before the high. Follows the two leg convention and there is strong momentum above the high.
4. November 2017 Breakout
Unsimilar. There's a small 3 candle range before the breakout but this is just a clean run up. No one had any chance to make a cent short there. Far from the current conditions of 7 months of on and off bear opportunities.
5. December 2017 Breakout
I'd say this would perhaps be the one that would be cited as the best outcome for bulls. But again this is very different. It's similar in that there's a long period of indecision after the breakout but this never comes back under the ATH. So when we look at the last consolidation action under ATH, nothing like it. We should be sitting above previous highs now.
6. December 2020 Breakout
Not similar. Any of the notable pullback action was before the high was made. A new high resulted in a spectacular rally from the outset.
-----
And that concludes the successful BTC breakouts throughout its history. I missed some of the smaller pullbacks etc but any time there's been something like this and BTC recovered and made a new trend leg, that's what they looked like.
One could fairly argue there's the same "General tone" to the price moves as some of the historic breakouts. But it's not valid to say this look exactly like any of the previous breakouts based on the metrics used. We didn't find any with a strong match on all three of the testable criteria. We didn't really find that many that matched one.
Based on the things we can be sure of, we can say BTC is not currently acting like it has off any successful breakout of the high.
----
8. April 2021 Failed Breakout
The failed breakout in 2021 also wasn't much alike the action we have now. This was a really simple failure of the uptrend. It came down in two legs and once the convention of two legs in a pullback failed, that was the break. In a like for like move, BTC would have made its break a few months ago.
Up until that failed, this was the most similar in terms of action off a new high (In my opinion).
Now - we're into entirely "Uncharted" territory. We've not seen it before. There's never been a time BTC made a break of the high and then went into this type of;
A - Complex correction in a bull trend.
B - Break pattern in a bear trend.
Whatever it was going to be, had always happened by now. The closest to an exception on that being when BTC traded entirely flat a little above the previous high for months (And that's a very different look to 7 months of every rally getting rejected under ATH).
When viewed from classic TA, there are several ways one find different types of bullish patterns. It's possible all of this choppy action has built up an inverted head and shoulders. The head fake low being in and us being in the chop section before the breakout. Valid view to have - something I have to set stops in respect of as a bear.
But these all have known failure rates - and they are far higher than most people think.
The head and shoulders pattern works out about 1/3 of the time. it sucks as a win rate pattern. Trust me. The formation of something like a head and shoulders comes in many breaks and most of the time when the HS fails it produces a strong counter move. Over reliance on the head and shoulders gets you killed as a reversal trader.
Flags and trendlines etc, same deal. If they fail it's spectacular and most of the time a pattern really just tells us a decision will come. It's the breaking of the stop zone on one version of the signal or the other that the method is expected to have an edge in predicting direction. These things also always fake out to one side or the other before the true break.
If this rally was a false breakout and we closed wick down on the month - then sold the next month, we'd be threatening the bottom of the range and this would look far more bearish. At which point it might be super bearish or that might be the fake out before the bull move. The amount of things that can happen here is vast.
There's really only one thing I think it's reasonable to have some degree of confidence in here and that is after there being a 7 month consolidation - something is going to happen once the direction is picked.
That is very likely. Once the range is done - there'll be a big strong swing. If it's bearish, probably be 50% down (Likely with some bad news) - and if it's going to be bearish, it has to be in this area. This is where the breakout would usually fail in the type of pattern where this capitulates.
So from a tactical betting/RR perspective, the short makes most sense to me. Since the only way I see this type of rejection happening is in a crash like style - most logical thing seems to be buying super deep OTM puts on COIN (Spreads are helpful on these to keep costs down, the calls/puts are pricey).
I can make over 10:1 on my bets if the rejection comes and I can lose a redefined amount if I am wrong. Makes more sense that betting on BTC directly where I have to set a sto out the way and have maybe 1:5 RR (And know I have to exit perfectly because it might be a wick move with nominal time to do anything).
With the added risk of getting slipped in one of those explosive bull breakouts. Not a great value proposition - but the COIN puts did spectacularly last time and if this was a bull trap bonce we should be at the end of it now.
======
Out there there's a lot of bulls that know it's this pattern and bears that know it's that pattern - but we actually have a unique event in terms of the most obvious and trackable TA metrics.
Anything can happen. It's not wise to be overly confident in either direction based on the TA.
All the TA can strongly imply for us, is something big comes out of this decision when it's made.
Let's first define the action we have now. We can argue all day over different patterns this can be called but there are a few things we can non-subjectively mark out and compare with previous times;
- We know there's been a new high.
- We know time from the low to high and the time from the high to now (We'll use the ratio).
- We know how many lower lows there's been in the drop off the high.
And that's it. Really. From a purely objective point of view it's hard to say we know anything else, but these are things we do know and can always know in previous examples.
We can look and see how many times this has happened and what happened next.
We'll skip out the extreme early days of BTC because the lack of liquidity made it wild and quite meaningless from a TA perspective, but we will look at all the big breakouts from as soon as the chart started to observe structural things we attempt to understand with TA.
1. April 2013 Breakout
Breakout Date: April 14, 2013.
Price Movement: BTC reached a new high of $259 after a sharp rally from $50.
Pullback: 42% retracement to $150 before resuming the uptrend.
]Consolidation vs. Trend Leg: Consolidation lasted 7 days, trend leg lasted 90 days (ratio 1:13).
This breakout would have to be said to be unlike current times in all ways. The pullback in it was very brief, came before the new high and there was a run away break on the new high. There was no sequence of lower lows. The pullback time relative to the trend time was also far less.
2. December 2016 Breakout
Breakout Date: December 2016.
Price Movement: BTC broke above $1,150, continuing up to $1,777.
Pullback: 35% retracement from $1,150 to $750.
Consolidation vs. Trend Leg: Consolidation lasted 150 days, trend leg lasted 563 days (ratio 1:4).
This came off a new high, making it a much more comparable breakout than the previous one. But the pullback and trend was a much sharper and cleaner affair. The pullback followed the convention of two main corrective legs (And a little head fake) and then the uptrend resumed. It also has broken out by this time (Relative to the move from the low).
3. June 2017 Breakout
Breakout Date: June 2017.
Price Movement: BTC broke above $3,000, moving toward $5,000.
Pullback: 38% retracement from $3,000 to $1,850.
Consolidation vs. Trend Leg: Consolidation lasted 30 days, trend leg lasted 90 days (ratio 1:3).
Could not be said to be very similar in any way. Pullback comes from a bit before the high. Follows the two leg convention and there is strong momentum above the high.
4. November 2017 Breakout
Breakout Date: November 2017.
Price Movement: BTC surged past $8,000, reaching $9,500.
Pullback: 40% retracement from $5,000 to $3,000.
Consolidation vs. Trend Leg: Consolidation lasted 15 days, trend leg lasted 3 months (ratio 1:6).
Unsimilar. There's a small 3 candle range before the breakout but this is just a clean run up. No one had any chance to make a cent short there. Far from the current conditions of 7 months of on and off bear opportunities.
5. December 2017 Breakout
Breakout Date: December 2017.
Price Movement: BTC surged from $10,000 to $17,000.
Pullback: 30% retracement from $7,888 to $5,500.
Consolidation vs. Trend Leg: Consolidation lasted 7 days, trend leg lasted 60 days (ratio 1:9).
I'd say this would perhaps be the one that would be cited as the best outcome for bulls. But again this is very different. It's similar in that there's a long period of indecision after the breakout but this never comes back under the ATH. So when we look at the last consolidation action under ATH, nothing like it. We should be sitting above previous highs now.
6. December 2020 Breakout
Breakout Date: December 2020.
Price Movement: BTC broke through $20,000 and surged past $40,000.
Pullback: 16% retracement from $12,000 to $10,000.
Consolidation vs. Trend Leg: Consolidation lasted 14 days, trend leg lasted 9 months (ratio 1:19).
Not similar. Any of the notable pullback action was before the high was made. A new high resulted in a spectacular rally from the outset.
-----
And that concludes the successful BTC breakouts throughout its history. I missed some of the smaller pullbacks etc but any time there's been something like this and BTC recovered and made a new trend leg, that's what they looked like.
One could fairly argue there's the same "General tone" to the price moves as some of the historic breakouts. But it's not valid to say this look exactly like any of the previous breakouts based on the metrics used. We didn't find any with a strong match on all three of the testable criteria. We didn't really find that many that matched one.
Based on the things we can be sure of, we can say BTC is not currently acting like it has off any successful breakout of the high.
----
8. April 2021 Failed Breakout
- []Breakout Date: April 2021.
[]Price Movement: BTC reached $64,000 but failed to sustain the breakout.
[]Pullback: 18% retracement from $61,000 to $50,000.
[]Consolidation vs. Trend Leg: Consolidation lasted 12 days, trend leg lasted 90 days (ratio 1:7.5).
The failed breakout in 2021 also wasn't much alike the action we have now. This was a really simple failure of the uptrend. It came down in two legs and once the convention of two legs in a pullback failed, that was the break. In a like for like move, BTC would have made its break a few months ago.
Up until that failed, this was the most similar in terms of action off a new high (In my opinion).
Now - we're into entirely "Uncharted" territory. We've not seen it before. There's never been a time BTC made a break of the high and then went into this type of;
A - Complex correction in a bull trend.
B - Break pattern in a bear trend.
Whatever it was going to be, had always happened by now. The closest to an exception on that being when BTC traded entirely flat a little above the previous high for months (And that's a very different look to 7 months of every rally getting rejected under ATH).
When viewed from classic TA, there are several ways one find different types of bullish patterns. It's possible all of this choppy action has built up an inverted head and shoulders. The head fake low being in and us being in the chop section before the breakout. Valid view to have - something I have to set stops in respect of as a bear.
But these all have known failure rates - and they are far higher than most people think.
The head and shoulders pattern works out about 1/3 of the time. it sucks as a win rate pattern. Trust me. The formation of something like a head and shoulders comes in many breaks and most of the time when the HS fails it produces a strong counter move. Over reliance on the head and shoulders gets you killed as a reversal trader.
Flags and trendlines etc, same deal. If they fail it's spectacular and most of the time a pattern really just tells us a decision will come. It's the breaking of the stop zone on one version of the signal or the other that the method is expected to have an edge in predicting direction. These things also always fake out to one side or the other before the true break.
If this rally was a false breakout and we closed wick down on the month - then sold the next month, we'd be threatening the bottom of the range and this would look far more bearish. At which point it might be super bearish or that might be the fake out before the bull move. The amount of things that can happen here is vast.
There's really only one thing I think it's reasonable to have some degree of confidence in here and that is after there being a 7 month consolidation - something is going to happen once the direction is picked.
That is very likely. Once the range is done - there'll be a big strong swing. If it's bearish, probably be 50% down (Likely with some bad news) - and if it's going to be bearish, it has to be in this area. This is where the breakout would usually fail in the type of pattern where this capitulates.
So from a tactical betting/RR perspective, the short makes most sense to me. Since the only way I see this type of rejection happening is in a crash like style - most logical thing seems to be buying super deep OTM puts on COIN (Spreads are helpful on these to keep costs down, the calls/puts are pricey).
I can make over 10:1 on my bets if the rejection comes and I can lose a redefined amount if I am wrong. Makes more sense that betting on BTC directly where I have to set a sto out the way and have maybe 1:5 RR (And know I have to exit perfectly because it might be a wick move with nominal time to do anything).
With the added risk of getting slipped in one of those explosive bull breakouts. Not a great value proposition - but the COIN puts did spectacularly last time and if this was a bull trap bonce we should be at the end of it now.
======
Out there there's a lot of bulls that know it's this pattern and bears that know it's that pattern - but we actually have a unique event in terms of the most obvious and trackable TA metrics.
Anything can happen. It's not wise to be overly confident in either direction based on the TA.
All the TA can strongly imply for us, is something big comes out of this decision when it's made.
Note
The most likely breakout based on analysis of BTC history failed here.
At that point, BTC started to do something different from all historic breakouts that succeeded.
Note
Then at this point it did something different from the main big bear breaks.
So this is actually new. Whatever the outcome, something different happened than the previous examples of a new high being made.
Very much open to speculation.
Note
Pretty much every prediction anyone (Bull or bear, fundie or techie) has made based on observations of BTC historic patterns recently has been wrong.
The high was made before the halving. Various types of TA thing whipsawed.
And this makes perfect sense when you just accept BTC is doing something it's never done before. That's why all pattern forecasters are getting caught out.
My bias on that would be that means to bet on the failure of the most popular models looking forward. At the high RR points.
Which I've done into this rally.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.