Bitcoin, The Bear Market Is Finally Over

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Bitcoin, The Bear Market Is Finally Over

A Surge In Cryptocurrency Is Now Expected

After several false starts Bitcoin, the worlds reserve cryptocurrency, has finally snapped its downtrend. The coin gained more than 20% in two days, breaking above an important downtrend line, as investor confidence returns. The coin has been trending lower for the last several months as scams and increasing regulation kept the market at bay. Now that those woes have worked their through the system traders can focus on fundamentals that point to widening acceptance of blockchain based technology.

What happened to effect this change in the market? There was no major news event to cause a market reversal but there was a development within the market that did, the downtrend ran its course. The market hit a key support level, a level that just happened to equal the mining cost of BTC, and that level held. It held not once or twice but over the course of several weeks and months. Each time that level was hit, near $6,675, prices bounced as traders scooped up new tokens at cost until, finally, there were no more sellers left in the market.

This is important for two reasons. The first is that selling pressures will abate and allow the price of Bitcoin to begin drifting higher, back towards its true market value. The second is that, now that the bear market is broken, all those bearish traders will begin to trade bullish. These factors will combine to form a rally in BTC that will easily take it back to $12,000 with a real possibility of retesting the all time highs near $20,000. In the near term the coin appears to be consolidating above the 30 day EMA in preparation for its next move higher.

Bitcoin resurgence has the entire cryptocurrency market moving higher. The biggest gainer in terms of market cap is Iota which gained roughly 50% in the three days ended Friday, 13 th April 2020. This token is a next-generation technology similar to blockchain but inherently very different. It uses a “tangle”, a sort of multi-channel distribution network, that allows transactions to be processed without the need for blocks or miners. The token is still trading for less then $2.00 but is likely to see big gains over the next few months. The all time is above $5.50, 360% above today’s trading price, and likely to be retested if not surpassed as the technology’s use widens.

Another digital token making big moves is Omisego. Omisego is an Ethereum powered blockchain technology linking merchants, financial institutions and consumers across Asia. It has surged nearly 100% in the last three days as traders flood back into the token with the expectation it will go live later this year. A move back to $18 is likely over the second half of April 2020 with a move up to retest the all time highs likely before summer.

When Capitulation? 3 Ways Bitcoin’s Bear Market Might End

Sam Ouimet

When Capitulation? 3 Ways Bitcoin’s Bear Market Might End

It’s an understatement to say the current price of the world’s largest cryptocurrency pales when compared to its past glories – at $6,700, bitcoin is down roughly 60 percent from its all-time high.

That said, market conditions aren’t the same as they have been in years past. Indeed, bitcoin’s 2020 boom has brought new attention, and with it, traders and investors who are left wondering if the asset can ever return to its former glory.

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Certainly, there’s no shortage of ways to approach the question, but one effective method is to look at the charts for historical patterns that could speak to investor psychology, and perhaps, yield valuable hints and clues about future performance.

Applying these theories, a market might be expected to “bottom,” or reach a new low, after a speculative bubble bursts in a moment often referred to as “capitulation.” Consisting of extreme selling over a short time period, the infamous 2020 bitcoin bear market finally bottomed out after it lost more than 40 percent of its value in less than three days at the top of 2020.

Since such an event could be measured and understood in real-time, some eagle-eyed investors picked up on the move, even drawing attention to it on social media.

That’s because, to chart addicts known as technical analysts, all known information about a particular asset is reflected in its price action. So, in order to predict bitcoin’s future, taking a look at its price history is perhaps the best place to start.

It’s an inexact science, and there’s no guarantee history will ever repeat. That said, observing the bitcoin’s past price action yields three possibilities worth of being discussed and considered.

1) We’ve seen the worst

While technical analysts only take price action into account, it’s impossible to ignore the implications a bitcoin ETF could have on prices of the cryptocurrency.

As an indication of the effect an ETF can have on prices of an asset, gold prices increased drastically in the years following the introduction of an ETF. Using this as a measure, it’s valid to assume bitcoin would succumb to a similar and explosive fate.

With several ETF proposals awaiting a decision, most importantly the VanEck-SolidX ETF on September 30, a trader must account for any possible outcome. The market is already overwhelmingly bearish, so the true devil’s advocate would play contrarian and account for the ETF’s trend-changing approval.

As shown in the above chart, ascending trend lines of support have played an important role throughout the history of bitcoin prices.

The first trendline took effect in 2020 when it provided reliable support for a strong uptrend from $2-$16. After surpassing $16, price action went completely parabolic, straying away from trendline until making a return at the end of 2020.

This time however, price broke through the support and immediate capitulation took place, selling off more than 40 percent of bitcoin’s price in three days.

Since the infamous capitulation and 2020 market bottom, price found a new ascending support (lower white line) that will look to once again come into play sooner than later.

The devil’s advocate claims “we’ve seen the worst” of the 2020 bear market, so he is expecting a bounce on or before the fast approaching trendline. The argument has merit, as several bitcoin ETF proposals will be decided upon in the next few weeks and an approval could be just enough to salvage the trend, avoiding large-scale capitulation entirely.

2) $3K to $5K in play

If there’s no bitcoin ETF approval, one could argue there’s no reason for bitcoin to resume its bullish uptrend until a market bottom occurs like it did in 2020.

Here lies the second bear market ending scenario.

Looking at how dramatically price reacted to a breach of its first long-term ascending support in the chart, it’s reasonable to assume it would have a similar reaction if the current trendline breaks (middle white line). If this does occur, there are two locations that present optimal bottoms following substantial capitulation.

The first “bottom zone” lies in the $5,000 area since it was the peak resistance level of the prior bull move, from $3,000 to $5,000.

Support and resistance lines experience an effect known as “ polarity ” when they are surpassed. When this occurs, resistance converts into support and vice versa because the party holding up or down prices has finally given up, which shifts control to the opposing party.

It’s important to note the $5,000 area has yet to be truly tested as support since it was initially breached as resistance. This suggests a test of the level as support is likely and elects it as a potential candidate for the market bottom.

However, capitulation from current levels would not be overly severe for the $5,000 level to hold, perhaps leaving some to believe the market needs more extreme sell-offs in order to find a true bottom. That is where the next potential “bottom zone” of

$3,000 could come into play.

Technically speaking, the $3,000 level is much stronger support than $5,000. Similar to the above zone, $3,000 marked the peak resistance of a prior bull move, except after this resistance broke, the same level was sufficiently tested and proved as support.

What’s more, the $3,000 bottom zone would represent an 85 percent deprecation from bitcoin’s all-time high, a near identical peak-to-bottom percent difference as the 2020 bear market of 86.65 percent, according to figures from the Bitstamp exchange.

1) $1K doomsday

Perhaps here lies another devil’s advocate, the ultra-bearish contrarian.

Upon a close examination of the price level (

$240) where the first ascending support trend line was breached in Jan. 2020, it coincidentally also marks the exact peak of the prior “mega” bull run when price surged nearly 1,000 percent from $16 to $240.

In a sense, breaking both the trend line and prior bull run high was a “double whammy” to investors giving them no other choice than to lose complete hope, the necessary precursor to capitulation.

According to this theory, if the current ascending trend line breaks, price may not find its “bottom” until reaching the high of the prior “mega” bull run, which in this case lies in the $1,200 area.

If prices were to fall to this level, it’s last hope would be to eventually find a new ascending support for the entire “bull cycle” to repeat, an estimated outcome depicted by the dashed white line in the chart.

Disclosure: The author holds BTC, AST, REQ, OMG, FUEL, 1st and AMP at the time of writing.

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The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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