Bear Market Rally May Lead to Lower Bitcoin Price – Bitcoin Magazine
Below is an excerpt from a recent issue of Bitcoin Magazine Pro, Bitcoin Magazine premium market’s newsletter. To be among the first to receive this insight and other market analysis on the bitcoin chain straight to your inbox, Subscribe now.
Bitcoin Bear Market Rally
Bear market rallies, whether in stocks or bitcoin, are a similar cyclical move that has played out in the markets time and time again. They can be compelling and volatile as investors become too far positioned in one direction.
We want to highlight the bear market rally case for bitcoin. Since bitcoin has closely followed broader risk-on assets this cycle, that is likely to continue as the market falls over the coming months.
We have bitcoin specific bear market cycles. After the latest rally, bitcoin is down 65% from its November all-time high, 253 days in. The 2013 and 2017 cycles bottomed out at 84.82% and 83.47% withdrawals, respectively, with both lasting close to 400 days. Bitcoin’s recent rally is not out of the ordinary for the typical bear market rally. Even a move to $30,000 is reasonable.
Bitcoin bounces back after major peaks
Typically, bear market cycles in the old world end after a 20% rise from the lows, so having a cycle that set new all-time highs seems like a stretch. Still, looking this way is compelling from a 435-day duration and 70% drawdown, which would fit the idea of the all-time high drawdown over time.
The other way to look at the rallies is to see how high prices move out of new lows. Below we have the rally percentages from new lows across cycles. Using daily close prices and not absolute bottom wick prices, the 2013-2015 cycle saw rally gains of 84.12% at its peak, while 2017-2018 saw 67.93%. In the current cycle, we have seen a rally of 35.54% at the high, while the latest move, at the time of writing, is around 26%.
Bitcoin price rises from new lows of 2013-2015
Bitcoin price rises from new 2017-2018 lows
Bitcoin price rises from new 2021-2022 lows
Last note
There is a case to be made that the bitcoin bottom is amid the wave of liquidations, capitulation-like behavior and almost every mean-reversing cycle metric, a good long-term opportunity to accumulate. Nevertheless, our research and analysis lead us to these questions:
How far will stocks fall? Is a 23.55% decline from an all-time high in the S&P 500 the worst we’ll see in this market? Are financial and liquidity conditions improving to justify a reversal? Has there been a fundamental change or catalyst for bitcoin that suggests it will not follow broader market movements?
It’s possible that bitcoin has already preceded that move and will likely be the asset to bottom first, regardless. We strongly believe that the more likely case is that bitcoin will at least return to previous lows and likely make a new one.
