The current correction is severe even for Bitcoin. But there is reason to be optimistic.
Bitcoin (BTC) is still trading in unsatisfactory territory. Because the cryptocurrency has been oscillating between 40,000 US dollars and 32,000 US dollars since mid-May – without making any move to switch to a new upward trend as soon as possible. At the time of writing, BTC is trading at $ 36,544, down 1.6 percent from the previous day.
In the medium term, too, it looks rather sobering. A look at the monthly overview reveals that this alleged mid-cycle corrector takes an unusually long time and is unusually severe. Two red candles on the monthly view? That didn’t happen in 2017.
It is also noticeable when logarithmized: The drop in May 2021 was violent. A number of feeders have been flushed from the market.
Drops like the one from May, in which BTC lost 50 percent of its value within days, do not leave investors without a trace. Especially newcomers were flushed out of the market. As our slideshow shows, Bitcoin’s volatility is nothing unusual:
Bitcoin: The 5 worst months since 2018
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January 2018: hangover mood after the bull party
The start of the year 2018 marked the end of the ICO bubble of 2017, which brought enormous price gains not only to Bitcoin, but also to Altcoins. Anyone who had not brought their sheep into the dry by then had to dress warmly. After the crypto rally had culminated in a Bitcoin price of almost USD 20,000 in December 2017, avalanche sales set in in January 2018, marking the beginning of a year-long decline for Bitcoin and Altcoins. Bitcoin plunged around 27 percent $ 13,880 to $ 10,150.
March 2018: The bears take over
In February 2018 it looked briefly as if the bears had shot their powder – the month closed with a gentle 30-day increase of 1.63 percent. But already in March it became clear that the correction phase was far from over. Bitcoin continued its plunge, trading at $ 6,928 in late March – 32 percent lower than the month’s start.
November 2018: An end with horror
It always gets worse: in November 2018, even the most hopeful hodler was robbed of the illusion that Bitcoin would move towards the 2017 all-time high again in the current calendar year. BTC slipped from $ 6,304 to $ 3,971. With the 30-day minus of 37 percent, the bears put an exclamation point under one of the toughest years in Bitcoin history from an investor’s point of view. Only for February 2019 should Bitcoin show a positive monthly balance again.
March 2020: Covid-19 strikes
In 2019, the Bitcoin course was able to make up some ground again. Within a year, BTC rose over 100 percent from $ 3,400 to around $ 7,160. The course for a bullish 2020 seemed set – then came Covid-19. The World Health Organization declared the corona pandemic on March 11, 2020 – with devastating consequences for the crypto and traditional markets. BTC tumbled below $ 4,000 for a short period, then the big dip buying began. Nevertheless, the Bitcoin price closed in March 2020 at USD 6,421, printing a 30-day minus of almost 25 percent.
May 2021: What goes up, Musk come down
Based on the Corona debacle, 2020 became one of the strongest years in Bitcoin history. Bullish news of institutional bitcoin purchases and the BTC integration of PayPal pushed the Bitcoin price back into the region of the 2017 record high and beyond at the end of the year. When Tesla CEO Elon Musk announced his company’s Bitcoin investment in March, Bitcoin exploded to an all-time high of over USD 60,000. But in May the disenchantment followed: Musk suddenly expressed concerns about Bitcoin’s high energy requirements and announced that Tesla would not accept BTC payments in the future. BTC then stumbled massively and could only gain a foothold again at USD 30,000. With a monthly minus of 35 percent, May 2021 was the worst month in recent Bitcoin history.
Big picture: the normal bitcoin madness
Anyone who has been following Bitcoin for a long time should also leave the latest correction cold. Bitcoin’s price history shows that the HODL principle is still justified.
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RSI: Bitcoin undervalued
But there is reason for cautious optimism. And that’s due to the RSI. The RSI (Relative Strength Index) is a technical indicator that can be used to reliably determine whether an asset is over- or undervalued. Typically, an RSI of> 70 is considered an overbought asset and a correction is expected. On the other hand, there are oversold assets, which can be identified using an RSI <30. At the moment, Bitcoin is still doing well at 61. However, if you compare the current RSI with past bull markets, the asset appears comparatively undervalued.
This is also the conclusion @therationalroot, an anonymous data analyst.
I definitely expect June to end with an uptrend, otherwise it would be the first time we have 3 consecutive months in a downtrend,
writes the analyst on Twitter.
Here, too, it becomes clear: The current correction is extreme, even for Bitcoin ratios. In 2017, the RSI fell to a value of 73 in the BTC correction in March. Basically, this allows only two conclusions: The bull market is over or Bitcoin is significantly undervalued and should soon make up ground again.
Permabulle PlanB also sees that the second option is closer. The originator of the controversial stock-to-flow model points out that according to its calculation, Bitcoin is still on the moon course. After all, even with such violent dips, BTC does not fall below the permitted values of the model.
2nd bounce off the lower band of S2F model. Will S2F break? Or will this turn out to be an excellent buy signal? I know multiple hedge funds that actually trade this BTC-S2F “cointegration” (despite that we can’t formally use cointegration tests because S2F ratio isn’t random). https://t.co/lnnN6H7OL6pic.twitter.com/qC3ULXlSlI
