With the failure of FTX and the recent collapse of Bitcoin’s price, the 200-week moving average (MA) has been broken downward.
PlanB unwittingly pointed this out yesterday on Twitter by sharing a chart.
Darkest Blue pic.twitter.com/pYCG5YE9qC
— PlanB (@100trillionUSD) December 8, 2022
The 200-week MA is widely used in technical analysis because it roughly corresponds to the average price over the past 4 years.
There is even a special page on lookintobitcoin.com that reports this updated figure, so you can keep track of it every day.
Looking at this graph, you can see that since 2012 this line had never been significantly and continuously crossed downward.
On the contrary, in the previous four episodes, Bitcoin’s price had practically rested briefly on this line, only to rebound.
The first occurred between late 2012 and early 2016, that is, shortly after the first halving. It is probably not particularly significant, however, precisely because what happened before the first halving is completely anomalous.
The second one, which was very significant, occurred between April and September 2015, that is, in the most difficult year so far for Bitcoin’s price. In that case, however, it pushed only slightly below the 200-week MA, and then rebounded sharply after about five months.
Something similar happened between January and March 2019, but this time without falling below the line and bouncing back after less than three months.
The third episode, on the other hand, was extremely short-lived and occurred in March 2020 because of the collapse of financial markets due to the onset of the pandemic. This, like the first, is also an anomaly that cannot be compared with the others.
The last break had occurred in early July, after the Celsius bankruptcy, but by mid-July, it was back above. Starting in late August, however, it was back below again, this time sharply and now for more than three months. For now, however, if we exclude the brief episode in early July that has already receded, the five-month high of 2015 has not yet been exceeded.
Bitcoin price: the technical analysis
However, it must be said that technical analysis is often used primarily to examine price movements over the short or very short term, while for the long term fundamental analysis is often preferred.
So it is not necessarily the case that this year’s sharp drop below the 200-week MA suggests that Bitcoin’s price is set to suffer much longer. It only suggests that it is in distress right now, but this was already well-known.
PlanB himself for example does not dwell so much on the 200-week MA line, but rather on the fact that Bitcoin’s price is currently well below that line. Since in all previous cases there has been a sharp rebound after a similar situation, PlanB seems to suggest that a rebound could be triggered this time as well.
However, it should not be forgotten that PlanB is a consistently bullish analyst on Bitcoin, so his analysis is likely biased in favor of BTC regardless.
Bitcoin’s further decline in price.
In fact, there are not a few who at this point expect Bitcoin‘s price to fall further.
After hitting an annual low on Nov. 10 at around $15,500, the price of BTC in the following weeks has climbed back up to around $17,000. This rise, however, does not seem particularly reassuring, so much so that many are arguing that it is nowhere near enough to make people believe that it cannot make new lows.
One hypothesis that is circulating is that such lows could be updated with a descent of around $14,000.
Are your waiting for $14k #Bitcoin ?
— Ash WSB (@Ashcryptoreal) December 8, 2022
Actually, the probably more important figure is $10,000, since a descent to that point would mean a worse bear market than the past two.
Soooo… is #bitcoin still going to hit $10,000… or nah?
— Lark Davis (@TheCryptoLark) December 9, 2022
Previous bear markets
Throughout its history, which began in 2009, Bitcoin has already experienced three halvings of the rate at which new BTC are created.
In all three cases, in 2012, 2016, and 2020, the following year triggered a powerful bull run that set new record highs. Indeed, in all three cases, one can safely speak of a real speculative bubble, which then burst the following year.
Thus in both 2014 and 2018, there were two heavy bear markets, and 2022 was no exception. But there is a difference.
In both past cases, the minimum price of the bear market was 85 percent lower than the previous maximum price.
By contrast, in 2022 the $15,500 minimum price corresponds for now “only” to a -77% from last year’s November high, effectively making the post-bubble bear market of 2022 paradoxically the least severe in Bitcoin’s history.
Should Bitcoin’s price fall further to -85% from the highs, it would have to fall below $11,500, so up to that point, there would actually be nothing abnormal. Should it, on the other hand, fall to $10,000 or below, the current bear market would indeed be worrisome.
It must be said, however, that the last quarter of 2022 in some ways resembles the last quarter of 2018 in terms of Bitcoin’s price trend.
At that time there was a collapse starting in mid-November, and it lasted until about mid-December. This time, however, there was in the first 10 days of November, and then it stopped.
This may mean either that the low has already been reached, and was much lower in percentage than in 2018, or that a second phase of collapse may still await us that has not yet occurred. On the other hand, for example, in 2014/2015 the lowest peak of the bear market occurred in January following the last quarter of the bear market year, that is, in January 2015. This seems to be precisely the scenario imagined by many, namely that the minimum peak of this bear market could occur in early 2023.
One important thing should be added, however. In fact, during 2022 not only did crypto markets collapse but also traditional markets to some extent. The fact is that in 2020 and 2021 the markets were inflated by the ultra-expansive monetary policy of the Central Banks, and especially the Fed, and when their monetary policy became restrictive the collapse was inevitable.
The curious thing is that the 2022 bear market in traditional markets seems to have stopped as early as October. In fact, probably if FTX had not failed, the November crash in crypto markets would not have happened. And it was not that deep anyway, since while between May and June the price of Bitcoin lost more than 50 percent, in November the loss stopped at -25 percent.
So should there be no further serious problems in the markets as serious as the one caused by the FTX failure, it seems possible that no further collapse will occur.
However, it should be pointed out that there are many who think that the sequence of crypto failures in this bear market has not yet ended, although for example the failure of BlockFi following the FTX failure did not cause further collapses.