On October 20, 2021, the price of Bitcoin (BTC) exceeded $66,000 and hit a new all-time high, before bull trapping in the Monday November 8 session and entering one of its biggest historical bear market. Today is Thursday, October 20, 2022, so the market is celebrating the 1st anniversary of its ex-ATH, the time interval from October 20 to November 8.
Bitcoin (BTC): the old historical record is soon celebrating its 1st anniversary
Is BTC technically oversold after a year of bear market and global-macro fundamental crisis?
When we study the major bear markets in the short history of Bitcoin’s stock market (study of bear markets for 13 years), 5 major low dates are to be noted :
- the month of November 2011 with more than 90% drop since the old historical record;
- the month of January 2015 with an 80% drop since the former ATH;
- the month of December 2018 and its -80%;
- the month of March 2020 (low point of the stock market shock of the health crisis) and its – 72%;
- and finally, the level of stabilization of the market since June 2022 with also the measure of -72%.
The price of Bitcoin has therefore lost 72% since its former all-time high.or 72% for almost a year.
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The fact of stabilizing on the same drawdown that the trough of the fall linked to the arrival of Covid-19 in the West is not a sufficient argument for a low point, but when we practice technical analysis on this curve (see graph below), in particular the price/momentum approach (the momentum being represented here by the RSI technical indicator), a bullish divergence is present.
A chartist trendline, on the other hand, suggests only one final purge at -80% drop from the ex-ATH (i.e. approximately a price of $14,000 for BTC) could take place before a real bullish rally in the market.
Chart that exposes the percentage decline of BTC since its former all-time high
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The bearish annual momentum reaches its extreme low zone, watch out
More broadly, is Bitcoin price oversold in terms of momentum after this 72% drop in one year? This is an amplitude of correction that is almost also found on the total market capitalization of the cryptocurrency market, down 65% in 12 months.
In order to answer this question in a direct way and without language of month, the basic functions of mathematics are the right tool. The relative momentum (or more simply rate of change in % over a given period) makes it possible to identify the extreme levels of inflection of a financial asset, upwards and downwards.
The chart below shows Bitcoin’s 12-month relative momentum and historically, the market has always recovered (within the short history of bitcoin of course) after losing 75% YoY.
You can see that the curve is very close to this level, the market will therefore very soon make the choice between rebounding and repeating its historical pattern Where sink and enter a graphic no man’s land.
Chart that exposes BTC’s 12-month relative momentum (12-month ROC)
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Vincent Ganne is a market strategist, technical analyst, trainer on the stock market and speaker on BFM Business. With a long experience in the field of analysis, he offers a global approach to financial markets. Both from a macroeconomic point of view and from a microeconomic point of view. Vincent Ganne also uses many aspects of chart analysis with the aim of forecasting trends in financial assets over the medium and long term.
Vincent Gane
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