Bitcoin (BTC) peaked at nearly $ 69,000 in November 2021, triggering the latest fireworks in the bull market 2020-2021. Since then, the bitcoin price has been on a downward trend, with no bottom in sight. But there is definitely a floor somewhere in this bear market, which makes many people wonder: is there a way to know what the bottom price is?
Many traders and investors are attracted to the search for bottom timing. Since it marks the lowest price for a given cycle, any price action that follows the low point is a net positive. But trying to time the bottom of the wave can be an insane rush. As Cred, pseudo-trader and teacher of cryptocurrencies, to CoinDesk, “the bottom is usually only obvious afterwards. Like the top.
CoinDesk asked experienced traders and investors to tell it about the signs of the bitcoin bottom, whether the bottom is significant, and what alternatives investors and retailers can look for.
The correlation between the bitcoin price and US stocks has never been stronger. The world’s largest cryptocurrency is much like a large Nasdaq-listed tech stock, so analysis of bitcoin’s stock must take into account the macroeconomic conditions that support the real economy.
“An important bitcoin bottom signal for me is when we see data showing us that inflation is trending convincingly lower,” Marcus Sotiriou, analyst at digital asset broker GlobalBlock, told CoinDesk. “I would be wary until inflation starts to fall because we learned that the Federal Reserve is king when it comes to risky assets like crypto, and the pain of quantitative easing can last forever for many months.”
Since much of bitcoin’s price action is closely linked to macroeconomic conditions, it makes more sense to see a macroeconomic bottom.
But it is also not easy to determine when the macroeconomic crisis will worsen.
“I do not think we can be convinced of a macroeconomic bottom until the Federal Reserve slows down its rate hikes,” Sotiriou said. However, if the Federal Reserve reverses its position, the market will gain confidence. “The time we see this happening may be when bitcoin has made a significant move from its lows,” he said.
There are a few characteristics that are common to all bitcoin price drops.
“The lowest price in 2015 came after being held in a tight price range for a year, and the low price in 2019 came after a three-month period of low volatility,” Josh Olszewicz, chief trading officer, told CoinDesk. research at cryptocurrency fund manager Valkyrie Investments. On the same topic: Ethereum (ETH): Towards a $ 1,000 billion capitalization by 2025?.
“Dips usually take time to form because the amount of buyers and sellers eventually balances until demand exceeds supply,” he said. In technical terms, these extended periods are called “accumulation”.
Cryptocurrency markets are often volatile with extreme price movements. But sometimes they get boring and act sideways: You wake up, check the price, and there is only a change of 0.1%. Olszewicz said low bitcoin prices have historically followed “longer periods of low volatility and unexciting price movements.”
Signs of accumulation include “multiple touches of the 200-week moving average, as well as staying below the realized price of bitcoin or the total average price of all coins moved on the chain,” Olszewicz explains. “Instead of trying to time the bottom perfectly, savvy investors often look to past bear markets to find these technical signs and start taking an average of dollar costs when similar conditions are met.”
A period of underestimation
Instead of thinking of the bottom line as a single price point, it might be more helpful to think in price ranges. Also see: People are scared – Crypto is preparing for another earthquake after the $ 2 trillion crash in the price of Bitcoin and Ethereum..
“Many retailers try to time exact lows or highs, and often fail to do so,” pseudo-dealer ChimpZoo told CoinDesk. ‘They should instead look for periods of overestimation and underestimation and act accordingly. »
Periods of undervaluation have historically been marked by large bitcoin sales, such as the crash at the start of the COVID-19 pandemic or in November 2018. “Whether you bought for $ 3,200 or $ 3,800 in 2018, or you bought for $ 5,200 or $ 6,200 in the past end of 2020 made no difference, “he said.
During the crash in mid-2022 became communityOver-geared crypto-trading companies or lenders had to capitulate, indicating “a potentially important level of undervaluation,” he said, adding that “when we pump out this range in the next week or three months, it’s hard to judge, but in the end it will these cheap prices are considered a gift in good time. “
The bottom is not the same as a new trend.
The floor is not a trampoline. Once the market hits bottom, it does not jump right away. Also see: Cryptocurrency: Finally a way out of the crisis? Top 3 Bitcoin, Ethereum, Ripple Price Predictions. A new trend may take a while to start.
“Even if prices bottom out, the market may continue to suck if followed by a period of low volatility, illiquidity, etc.,” Cred said. He describes the bottom as “where the pain stops” and the new trend as “how serious wealth is created.” And there can be a long time between the two.
Look for a trend rather than a bottom.
“Looking for the start of a long-term recovery is more important than looking for the bottom,” VKTR, a pseudonymous trader and senior contributor to decentralized exchange IDEX, told CoinDesk.
“Of course you may be a little behind, but you do not want to sweat because you bought a drop that then dipped another 50% or that the price has been at your entrance for five months.”
The mid-2022 crash was marked by a series of unpleasant events, such as the gigantic collapse of the stackecoin algorithm UST and the bankruptcy of several high-profile cryptocurrencies.
For the bottom to form, time must heal the anxious emotions of the market.
“The bottom is as much a product of time as it is a product of price, in most cases,” Cred said. “The bad memories must disappear from the public consciousness, the risk of reputation must disappear, the enthusiasm of survivors, builders and other established people must return, and cynicism must diminish to give way to optimism.”
Be vigilant and consult with your financial advisor before making any investment decision. Mirror-Mag can not be held responsible in case of bad investments. Before using a third-party service, you should do your own research.