Bitcoin (BTC) peaked at nearly $69,000 in November 2021, kicking off the 2020-2021 bull market’s latest fireworks. Since then, bitcoin price has been in a downtrend, with no bottom in sight. But there must be a bottom 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 drawn to the search for bottom timing. Since it marks the lowest price of a given cycle, any price action that follows the trough is a net positive. But trying to time the bottom of the wave can be a maddening rush. As Cred, pseudo-trader and educator in cryptocurrenciescurrencies, to CoinDesk, “the bottom is usually only apparent afterwards. Just like the top.
CoinDesk asked experienced traders and investors to share the signs of bitcoin’s 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 trades much like a large Nasdaq-listed technical stock, so the analysis of bitcoin stocks must take into account the macroeconomic conditions underlying the real economy.
“An important bitcoin bottom signal for me is when we see data that shows us inflation is convincingly lower,” Marcus Sotiriou, an analyst at Digital Asset broker GlobalBlock, told CoinDesk. “I would be cautious until inflation starts to fall because we have learned that the Federal Reserve is king when it comes to risky assets like crypto, and the pain of quantitative tightening could last for months on end. †
Since much of bitcoin’s price action is closely tied to macroeconomic conditions, it makes more sense to look at a macroeconomic bottom.
But it is also not easy to determine when the macroeconomic crisis will worsen.
“I don’t think we can be convinced of a macroeconomic bottom until the Federal Reserve slows its rate hikes,” Sotiriou said. However, if the Federal Reserve reverses its position, the market will gain confidence. “The time we see this happening could be when bitcoin has taken a significant step from its lows,” he said.
There are a few characteristics that all bitcoin price drops have in common.
“The 2015 low price level came after being held in a tight price range for a year, and the 2019 low came after a three-month period of low volatility,” Josh Olszewicz, head of trading, told CoinDesk. Research at crypto fund manager Valkyrie Investments. On the same topic: Ethereum (ETH): Towards a $1,000 Billion Capitalization by 2025?†
“Dips usually take time to form as the number of buyers and sellers eventually balances out 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 trade sideways: you wake up, check the price and there’s only a 0.1% change. Olszewicz said bitcoin’s price declines have historically followed “prolonged periods of low volatility and unexciting price movements.”
Signs of accumulation include “multiple touches of the 200-week moving average, as well as holding below the realized price of bitcoin, or the aggregate average price of all coins moving in the chain,” explains Olszewicz. Rather than timing the bottom perfectly, savvy investors often look to past bear markets to find these technical signs and begin averaging the dollar cost when similar conditions are met. †
A period of undervaluation
Rather than thinking of the bottom as one price point, it might be more helpful to think in price ranges. Also see: People Are Afraid – Crypto Braces For Another Earthquake After The $2 Trillion Crash In The Price Of Bitcoin And Ethereum.†
“Many traders try to time exact lows or highs, and often fail to do so,” pseudo-trader ChimpZoo told CoinDesk. “They should instead look for periods of overvaluation and undervaluation and act accordingly. †
Periods of undervaluation have historically been marked by major bitcoin sell-offs, such as the crash at the start of the COVID-19 pandemic or in November 2018. “Whether you bought in 2018 for $3,200 or $3,800, or ultimately for $5,200 or $6,200 in 2020 made no difference,” he said.
During the crash of mid-2022, the societyOver-leveraged crypto trading firms or lenders have had to capitulate, pointing to “a potentially significant level of undervaluation,” he said, adding that “when we pump out of that range in the next week or three months, it’s hard to judge, but in the end these cheap prices will be considered a gift in due course.”
The bottom is not the same as a new uptrend.
The floor is not a trampoline. Once the market hits the bottom, it doesn’t jump right up. Also see: Cryptocurrency: finally a way out of the crisis? Top 3 Bitcoin, Ethereum, Ripple Price Predictions† It may take a while for a new uptrend to start.
“Even if prices bottom out, the market may continue to suck if there is a period of low volatility, illiquidity, etc. Credit said. He describes the bottom as where “the pain stops” and the new uptrend as “where serious wealth is created”. And there can be a long span of time between the two.
Look for an uptrend rather than a bottom.
“Looking for the start of a longer-term recovery is more important than looking for the bottom,” VKTR, a pseudonymous trader and senior contributor to decentralized exchange IDEX, told CoinDesk.
“Sure, you might be a little behind, but you won’t sweat because you bought a drop and then dropped another 50% or that price has been on your entry for five months. †
The mid-2022 crash was marked by a series of unsavory events, such as the massive collapse of the stablecoin algorithm UST and the bankruptcy of several high-profile cryptocurrency companies.
In order to form the bottom, time must heal the anxious market sentiment.
“The bottom, in most cases, is as much a product of time as it is a product of price,” Cred said. “The bad memories must fade from public consciousness, reputation risk must fade, the enthusiasm of survivors, builders and other incumbents must return, and cynicism must disappear to give way to optimism.”
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