The market valuation of bitcoin rose more than 190 percent since the low of Dec. 15, 2018, raising the question when the retrace will come and how pronounced it will be. Now that BTC is retracing it begs the question whether this is the correction sideliners have been waiting for.
The bear market may have come to an end after a year-long period of declining prices that took bitcoin from $20,000 down to $3,000. Since the beginning of the bull trend, many analysts have speculated that the “bottom is in,” while others are waiting for a correction to give them a better entry point.
Crypto bottom is in
On Apr. 22, Willy Woo, a trader who was named one of the top-5 analysts of 2017, shared the results of a survey he conducted which revealed that most notable analysts and influencers in the crypto space believed the bear market was near an end.
I surveyed notable influencers, analysts and traders for their probability that the bottom is in for this bear market. Here are the results:
— Willy Woo (@woonomic) April 22, 2019
Among the people surveyed was Tuur Demeester, a founding partner of Adamant Capital, who asserted that a capitulation event took place in November 2018 when bitcoin’s market valuation declined by 48 percent, marking the end of the bear market. Demeester shared his findings that led him to believe that bitcoin was entering an accumulation phase, inferring that the bottom was in.
— Tuur Demeester (@TuurDemeester) April 18, 2019
Erik Voorhees, the CEO of ShapeShift, attributed the shift in the market sentiment to bitcoin’s network activity. According to Voorhees, the skyrocketing number of daily confirmed BTC transaction represented the most relevant metric in the market. Even though there is no direct correlation between the price of bitcoin and the number of confirmed transactions, their trend has been similar.
— Erik Voorhees (@ErikVoorhees) April 23, 2019
In addition, Peter Brandt, a 40-years-trading veteran, suggested that the break of the $4,200 resistance level on April 2, represented a pivot point for bitcoin giving signs of a new “parabolic phase.”
— Peter Brandt (@PeterLBrandt) April 5, 2019
Today, just a month and a half since the survey was conducted bitcoin’s market valuation rose more than 70 percent reaching a yearly high of $9,090 on May 30. Different analysts such as Tone Vays, a former VP at JP Morgan Chase, suggested that a 40 percent pullback could come at any minute allowing those who have been waiting for a retrace to get back in the market—but, is it realistic?
Corrections in a bull market
In a bull run, a short-lived correction or decline in the price of bitcoin can happen anytime a peak or significant resistance level is reached. Corrections can damage an investor’s strategy for the short term, but they are essential for a healthy continuation of a bull trend allowing prices to adjust and provide buying opportunities.
A different number of indicators and charting methods can be used to predict and track when a pullback will happen, but the exact moment when it will start, end, or how drastic it will be cannot be precisely determined. Nonetheless, looking at bitcoin’s history could hint if a 40 percent retrace is possible.
The most recent bull market lasted more than two years and approximately represented 10,000 percent gains. Since the low of Aug. 25, 2015, when bitcoin was trading at $198 its price began increasing to reach an all-time high of $19,760 on Dec. 17, 2018.
There were eight significant exhaustion points that marked the 2015–2017 bitcoin’s bull market. The high of $501 on Nov. 3, 2015, was followed by a 40.39 percent pullback while the high of $784 on June 17, 2016, experienced a 38.37 percent retrace.
An all-time high was achieved on Jan. 4, 2017, when bitcoin was valued at $1,180 and was followed by a 36.50 percent drop. Two months after the milestone, bitcoin hit a new all-time high of $1,320 on Mar. 8, to then fall 32.57 percent.
Since that time BTC began reaching higher highs every couple of months. On May 25, this cryptocurrency went up to $2,746 and immediately pulled back 31.38 percent. The high of June 12 when one BTC was worth $2,985 was followed by a 39.20 percent correction. A similar pattern happened after the high of Sept. 1 and Nov. 6 that saw bitcoin drop 40.12 and 30.09 percent respectively.
Based on the price action that BTC experienced in its latest bull market, a 40 percent correction could indeed happen as a sign of a healthy trend. Although it cannot be determined when exactly it will happen, several indicators on the weekly chart could be anticipating that the time is near.
Bitcoin technical analysis
On the 1-week chart, a doji candlestick pattern formed last week could have indicated the beginning of a correction, according to Peter Brandt.
— Peter Brandt (@PeterLBrandt) June 4, 2019
Based on TD Sequential Indicator, the current candlestick is a green nine, which is also a sell signal. This technical index predicts a retrace that could last one to four weeks before the bullish trend continues.
If the signal is validated, bitcoin could drop down to the 50-week moving average which will represent a 37.20 percent drop, but first, it will have to break through the support given by the 100-week moving average.
Nick Cote, the CIO at Redacted Capital, also believes that a drop to the 2018 support level that sits between $6,100 and $5,880 is possible and could set the stage for the next “multi year bull cycle.”
I think $btc will bounce around $7,200 – $7,400, but my final target is the 2018 support level. Assuming it holds again, I'm on board for the multi year bull cycle into the next havening event in 2020.
— Nick Cote (@mBTCPizpie) June 4, 2019
A golden opportunity?
Although a different number of conditions must be met before the depth of the next correction can be predicted, the opportunity for those investors who missed the $3,000 bottom could be happening.
Most of the technical indicators tell that the probability for another $3,000 BTC is low, but the recent surge in prices could be a harbinger for a 40 percent correction. Now, it is just a matter of time to see if the current pullback has the selling pressure needed to take bitcoin below $6,000.
A redditor attributed the recent retrace to a group of individuals manipulating the market. Before the price dropped 25,000 BTC were moved to Coinbase and about an hour later the same amount of bitcoins was transferred to another wallet with an additional 10 million USDT. The redditor claimed that the manipulators were able to profit $15 million in just a few hours.
Whether the root of the correction is technical or fundamental, it will give a chance for many investors sitting on the sidelines to enter the market a possibly take advantage of a continuation of the potential bull run.