By Victor Argonov, senior analyst at International FinTech EXANTE
Before our eyes, the “last battle” of the bitcoin bears is taking place. If the current dump is indeed limited to $31,300, then many big players will assume that the previous dump to $28,900 has really bottomed out. We will see an urgent signal for bulk purchasing.
Earlier this week I noted that the chain of Bitcoin crashes from May-June 2021 resemble those to the ones in 2019: the market fell deeper and deeper, but bounced each time.
Over time, the market always finds a bottom below which it cannot fall, after which a bull market begins. However, it’s important to note that between the deepest dump in 2019 and the bull market there was another smaller dump. And such a dump we saw yesterday for Bitcoin: only up to $31,500, without the ability to repeat the previous minimum of $28,900. Will the 2019 pattern repeat itself even more accurately?
It turns out that the 2019 pattern continues to repeat itself today even more accurately than we wrote. And this further increases the chances of a new rally.
It is also worth comparing time intervals.
In 2019, there was an interval of 3-4 weeks between the deepest dumps, 2 weeks before the last shallow dump, and a rally began 5 days later.
In 2021, there were 2 weeks between the deepest dumps, and only 3 days before the last shallow one. Perhaps a new rally should be expected from day to day.
Two factors are at work in favour of the analogy’s validity today.
The repetition of crypto-hypes in the years after a bitcoin halving (2013, 2017, 2021) may continue even if already known to analysts (but with the broadest crowd).
Secondly, the FOMO factor in 2019 and today contributes to a new rally. The “bargain hunters” are worried. It is important for them not to miss the moment of buying before the rally, since the start of the rally can be very abrupt. Not buying before the rally means buying at higher levels in order to keep up with the trend. FOMO stands out against the background of the general mass of investors for its particular attention to current events. An unsuccessful dump to $31,300 after $28,900 can be perceived by them as a clear signal: the price did not collapse below $28,900, an urgent need to buy at the current price.
For a new rally to occur, the entire market doesn’t have to believe in it. A limited, but highly motivated group of FOMO investors need to start bulk buying in fear and this will mean the rate skyrockets. There may also be large institutional investors among FOMOs today who carefully analyse the market and themselves understand the described patterns.