BTC’s recent movements resemble that of the 2018 bear market.

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Bitcoin and Crypto Market News Monday, May 16, 2022 - 20:21

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Bitcoin price actions have been on a downtrend since its all-time-high in November 2021. In particular, it has seen a steep decline in the last couple of months and, for the first time ever, witnessed seven red weeks in a row. BTC nearly fell to the$25,000 level last week before bouncing back to the $30,000 range. 

Investors are clearly troubled by the latest moves and are hoping for some direction on when a reversal in fortunes can happen and at what price will Bitcoin hit its bottom. We might be able to help.

Understanding the 2018 bear market

Some analysts believe that its current market phase is similar to what happened in 2018. Let’s take a closer look at 2018.

Bitcoin’s 2018 bear market structure

Source: TradingView

In 2018, BTC lost 80% of its value and was trading at $3,000, losing nearly $200 billion from its market cap by late November 2018. Take a closer look at the blue circles on the candlestick chart, and you’ll be able to observe some patterns that we can project this year. 

The blue line running through the chart is Bitcoin’s 200-day moving average (MA). Bitcoin was rejected at the 200-day MA several times during the 2018 bear market phase. In particular, Bitcoin hit a low (circled 1), a higher low (circled 2), then got rejected at the 200-day MA (circle 3). This was followed by a series of lows (circled 4) and then there was a relief rally to reach the yellow trendline and the 200-day MA (circle 5).

The key things are – all this happened in a span of two months. The last rally was rapid and again saw rejection at the 200-day MA. Immediately after this pattern played out, BTC entered a brief consolidation phase that ended in a final capitulation post which the market started a new bull cycle.

2022 is showcasing a similar structure

Bitcoin’s 2022 bear market structure

Source: TradingView

Bitcoin is witnessing a very similar chart pattern in 2022. It first witnessed a low around $30,000, registered a higher low at $33,000, a brief rally that led to a test of 200-day MA. Post rejection it encountered a steep decline to $27K this month.  

Now, analysts expect a rally to take BTC to the $40,000 to $43,000 range (to register the 5th circle and complete the pattern). If the 2018 scenario is to play out exactly, we will see a rally to the 200-day moving average, but it should get rejected at the level.

BTC will likely then consolidate around $30,000 to $35,000 for 2-3 weeks before capitulating to register its bear market bottom (estimated to be around $18,000 to $23,000). Once BTC reaches this level, the next cycle of growth can begin, and new highs can be registered.

What can investors do now to prepare for this eventuality?

The best way to navigate the market is to be ready for all types of eventualities. Given the above possibilities, investors are better off to hold on to cash for the time being and wait for the final capitulation before they invest new monies into crypto. Also, the above scenarios will likely be accompanied by growing Bitcoin dominance of the market which would mean that altcoins will capitulate a higher percentage over this phase.

When the final capitulation happens, investors will find an attractive price to lock in their cost basis for the long term. This can happen over the next 2-3 months and hence its prudent to stack capital that can be deployed later. This is a game of patience that will reward over the long term.

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Disclaimer: This article was authored by Giottus Crypto Exchange as a part of a paid partnership with The News Minute. Crypto-asset or cryptocurrency investments are subject to market risks such as volatility and have no guaranteed returns. Please do your own research before investing and seek independent legal/financial advice if you are unsure about the investments.


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