Bitcoin Update: A Case That the Bottom Is In

With the current market sentiment, almost everyone in the crypto community believes that we have yet to bottom out. Most think that the recent Bitcoin (BTC/USD) rally is nothing but a dead cat bounce. From their point of view, we may rally to $4,300 or maybe even go as high as $5,800. Just as everyone’s turning bullish, gravity would pull us back down so hard that we’ll record new lows.

The scenario mentioned above is very much aligned to current market sentiment. A relief rally is long overdue, which is why it makes sense for Bitcoin to bounce now only to resume its downtrend with a revenge later on. To say that we’ll run to $10,000 from here without making new lows sounds downright ambitious, even ludicrous. This is exactly the reason why we believe that the bottom’s already in.

A move to $10,000 from here with shallow pullbacks will render almost every crypto investor in disbelief. From this perspective, we looked at the charts to see if current and historical price action support our claims. What we found was promising. In this article, we argue why we believe that the bottom is in.

Longest Bear Market in History

If you’re reading this, you deserve to be congratulated. You’ve survived the longest bear market in Bitcoin’s 10-year history. As of this writing, we’ve languished in bear territory for 423 days. During this period, Bitcoin lost as much as 83.84% of its value on Bitfinex.

2019 bear market

Previously, the longest bear market was in 2014. It lasted for 408 days and Bitcoin wiped out as much as $85.83% of its value from the top.

2014 bear market

While having the record for the longest bear market is not a reliable signal that the bottom is in, this puts things in perspective. With this information, bottoming out now doesn’t sound so far-fetched. It actually makes sense, especially if you consider the pattern that the market is currently printing.

Formation of a Double Bottom

Bitcoin’s close to $400 move up last week was ignited by a falling wedge breakout. Until today, most of the attention is still focused on the wedge. Many investors and traders seem to miss or possibly ignore the fact that Bitcoin has generated an Adam and Eve double bottom. With the exception of the inverse head and shoulders pattern, the Adam and Eve double bottom is one of the most reliable trend reversal signals.

BTC/USD Double bottom pattern

Perhaps one reason why people are ignoring this structure is because they have a bearish bias. Another reason is probably because an Adam and Eve double bottom does not look like the conventional double bottom pattern. In the latter’s case, price often falls very close to its previous lows. In an Adam and Eve formation, Adam’s V-shape bottom accounts for the significant difference in price between Eve’s rounded bottom. This gives the appearance of a higher low.

Nevertheless, the formation of this pattern tells us that the market is attempting to carve a bottom. As an objective trader or investor, you should be open to the idea that shorting Bitcoin now might be a fool’s errand.

Mirror Image of the Inverse Top

One of the things we often do before entering a trade is to reverse the chart. Looking at the chart from a different perspective can help validate or invalidate our view. We reversed the chart of the December 2017 bull run and discovered striking similarities between the price action then and the price action now.

The inverse chart of the 2017 top features a V-shape bottom, a falling wedge breakout, and a higher low setup.

Reverse chart of 2017 bull top

Aren’t these the exact same features that we’re looking at right now?

BTC 2019 bottom

At the very least, the similarities between the two charts tell us that exhaustion is setting in. If that’s the case, then total trend reversal may be on the horizon.

Bottom Line

Claiming that Bitcoin has bottomed out goes against current market sentiment. However, there’s a case for it. We’re in the longest bear market in Bitcoin’s history as Bitcoin forms a reliable reversal pattern. On top of that, the inverse chart of how the 2017 bull run ended looks similar to the current bottom. With these developments, we might see Bitcoin put together a strong disbelief rally to $10,000 without making new lows.

 

Disclaimer: The writer owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Kiril is a CFA Charterholder and financial professional with 5+ years of experience in financial writing, analysis and product ownership. He has passed all three CFA exams on first attempt and has a bachelor's degree with a specialty in finance. Kiril’s current focus is on cryptocurrencies and funds, as he does his own crypto research and is a Product Manager at Mitre Media. He also has his personal website, InvestorAcademy.org where he teaches people about the basics of investing. His ultimate goal is to help people with limited knowledge of finance and investments to create investment portfolios easily, and in line with their unique circumstances.