Recent speculation and rising bearish sentiment has brought on the possibility that the Bitcoin bull market is coming to an end and the all time high will remain at the $64,800 USD mark reached back in April. Based on historical analysis and using different indicators, it can be seen that this is not the case from a complete picture of the market.
Why Bitcoin is Bullish
Bitcoin currently is down from its all time high by nearly 30%. From a technical standpoint, it can be seen that there is a head and shoulders pattern that has formed on the daily. This pattern can be seen in the graphic below:
Bitcoin is showing a very apparent downtrend through multiple breakdowns of support. This can be seen clearly in the chart above. So, why be bullish on Bitcoin? Bitcoin has already undergone a massive correction from the all time high, as have many cryptocurrencies this month. When taking into account the complete historical picture of Bitcoin, some glaring bullish signals can be detected.
The first of such signals is the recent cross over of the Spent Output Profit Ratio (SOPR) below zero, which as been an extremely strong historical indicator of a buying opportunity on Bitcoin. I covered this topic in another article that I will link here. On the graphic below, a clear breakdown under zero can be seen on the SOPR chart for Bitcoin:
The other signal is the potential tagging of the 200 day moving average (MA200) that Bitcoin is setting up for. In previous bull markets, a correction that tested this trend line was an extremely bullish signal as it served as tremendous buying support for Bitcoin. As can be seen in the chart below, a test of the MA200 would take Bitcoin to a value around $40,000 USD, equivalent to support of the January all time high. In 2017, after a steep correction and retest of the MA200, Bitcoin proceeded to make a massive move up to the all time high of $20,000 USD. This is showing a similar set up. It should also be taken into account that this is historically the middle of the bull market for Bitcoin when utilizing the historical halving process data.
Additionally, the tax deadline for the United States has officially passed. That means for this years taxes, all holdings should have been accounted for should the holding party choose to have sold for capital gains. The recent bills passed by the Biden Administration increases the tax rate on capital gains and the wealthy has no doubt had an impact this month on the value of cryptocurrencies. Combine this with a significant amount of FUD from individuals such as Elon Musk, this recent sell off in a number of cryptocurrencies, including Bitcoin, does not come as a shock.
As for Bitcoin, look for a potential test of that MA200 around $40,000 USD. Should Bitcoin break below this trend line, it could be headed for another 20% correction back down to the $30,000 USD range. A test of the trend line, bounce up and then reset for support will confirm a new major bullish uptrend for Bitcoin as this bull market continues. While no one can predict exactly what is going to happen, especially on historically one of the most violently volatile assets in history in Bitcoin, it is important to try and take the most widely, bias-free, encompassing view possible when conducting any analysis.
As always, this is just my analysis after taking into account multiple viewpoints about the state of the current cryptocurrency bull market. It is important that you always do your own due diligence before choosing to invest.
*Note: I do not currently hold any bitcoin nor did I sell any*
