Bitcoin’s ongoing cycle is significantly different from its historical counterparts. Technical indicators, on-chain analysis, market sentiment and investor expectations are often divergent. The various deadlines are often in conflict with each other. This is why many analysts have a hard time clearly determining whether Bitcoin is already in a bear market or is still in a bull market.
In such a situation, it is useful to stop looking for analogies with the previous bull markets of 2012–2013 and 2016–2017. While agreeing with the working hypothesis that this market is different from previous ones, it is important to focus on the recent history of BTC price. It turns out that comparing the current correction to the summer 2021 dips provides more clues about the current health of the market.
In the following analysis, BeInCrypto analyzes fractal similarities between current BTC price action and the May-July 2021 correction. Smooth, rounded peaks and bottoms, multi-step price extremes, or psychologically similar loss perception on dips are just some of the similarities. The analysis provides several arguments that a bottom has already been reached and Bitcoin may soon start an uptrend.
Bitcoin price action
Bitcoin hit an all-time high of $69,000 on Nov 10, 2021. Since then, the largest cryptocurrency has dropped to a bottom of $32,917 on Jan 24, 2022. This represents a 52% decline.
The recovery so far has been relatively small. The corrective up move did not even reach the 0.382 Fib retracement level and ended at $45,821.
A month later, on February 24, Bitcoin hit an all-time high of $34,322 and left behind a 9% lower wick. Furthermore, the recovery was confirmed by an increase in volume, which reached its highest level since September 7, 2021 (blue arrows).
The significance of this price recovery and volume increase was pointed out by an analyst @BTCfuel. In a chart posted to Twitter, he saw a parallel with July 2021 and the start of the upward move that ended the previous correction.
Similarities to the Summer 2021 Fix
In fact, the structure of the current correction is showing more and more fractal similarities with the summer 2021 correction. At that time, Bitcoin hit an all-time high ATH of $64,854 on April 14. After that, there was a sharp decline that pushed BTC to a macro low of $28,805. The entire decline reached a size of 55% and was relatively larger than the current one.
Looking at BTC’s long-term chart from early 2021, we see analogous price action. Both peaks (blue) and lows (orange, dashed) of Bitcoin were not determined by single events.
Reaching extreme prices occurred in stages that resembled Wyckoff’s distribution/accumulation phases. Thus, the BTC chart generated — unlike previous cycles — smoothly rounded structures rather than sharp tops/bottoms.
In view of the current correction, it is possible that the highest low generated 2 days ago is the start of the next uptrend (orange, dashed). Therefore, if the fractal similarities between the two corrections are maintained, this could be a likely scenario for future events.
Three stages of BTC fund formation
Taking a closer look at the structure of the ongoing correction, one can see several similarities with analogous events in 2021. Of course, the most parallels can be seen with the summer 2021 correction, but other smaller fixes also have some similarities in the steps of a background formation.
The aforementioned @BTCfuel tweeted another BTC chart in which he points out the 3 stages of gradual sinking. According to him, each of the 2021 fixes was characterized by 3 phases:
Big red candle with long wickBig red full-length candle followed by bearish correctionHigher
Indeed, this perspective remains consistent with our analysis in the previous section. This suggests that a higher low could signal the end of the correction and the start of Bitcoin’s rally. On a comment in this tweet, another cryptocurrency market analyst @TheRealPlanC I wrote:
“Many of you are probably thinking, because of the macroclimate, these patterns are no longer relevant or valid. Time will tell…”
Realized loss suggests end of correction
An additional argument for the end of Bitcoin current correction thesis is provided by one of the on-chain indicators: Realized Loss. It also shows parallels between the current behavior of investors selling at a loss and the events of the summer of 2021.
chain analyst @OnChainCollege tweeted a graph of the Realized Loss indicator, highlighting the structural similarities. Furthermore, looking for reasons for the analogies, he wrote:
“It could be a coincidence. Or it could be a pattern of human psychology during a period of prolonged loss.”
In the chart, we can see that in both cases there were two waves of volume increase selling at a loss (green and yellow). These were followed by two smaller waves (pink and blue), with the second wave completing the correction. In addition, there was a large increase in the price of Bitcoin, with realized losses returning to their lows.
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