2 graphs to absolutely know to follow the development of the market

The cryptocurrency market recorded one of its best starts to the year in 14 years, with an increase of 28% for the price of Bitcoin and 31% for Ether (ETH). This bullish first part of January is fueling the debate about the end or not of the bear market that has been in place since November 2021. Here are two charts you absolutely need to know to join the argument in this debate.

The relative strength between Bitcoin and the Wall Street stock market

It is an almost unexpected start to the year for the cryptocurrency market, as it was caught by the consequences of the FTX affair in terms of confidence. While the stock market had rallied since last October and the US dollar fell more than 11%, the overall crypto market capitalization plunged amid capital outflows from centralized platforms.

The strongly bullish start to the year for cryptos (+28% for bitcoin price and +31% for the ETH/USD rate) therefore makes it possible to catch up with other risky assets on the stock market and to erase the bearish effects of the fall in early November last year.

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But is this enough to argue for the end of the bear market in place since November 2021? Note that for some bear market started in the spring of 2021 with the first upward changes in interest rates on the credit market.

Indeed, the market’s rise from $16,000 to $21,000 allowed us to register the first resistance break in more than 15 months, accompanied by a bullish reversal of the various measures of volume, engagement and participation (as the rise from asset under management of the world’s first crypto ETF, BITO).

This is certainly not a new bull run given the very high fundamental uncertaintybut on the other hand, it seems fair to me to say that the bear market has neutralized itself. The challenge now is to demonstrate that the $19,000 / $20,000 price zone has regained its support status, because breaking this zone again would be proof that the market experienced only a dead cat jumps.

On the side of the arguments in favor of the end of the bear market, there are many bullish divergences active in weekly data, as for the Bitcoin/S&P500 ratio.

Chart revealing the relative strength relationship between the US stock market and the price of bitcoin (the US stock market is represented by the S&P 500 stock market index)

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Bitcoin’s drawdown percentage curve versus its previous ATH

Let’s pay tribute to the “price/momentum” type technical methodology because there were several bullish technical divergences between the price action and its first derivative in the past few weeks. If you watch my videos every Tuesday, I use the RSI technical indicator to represent market momentum ie. its underlying velocity. These bullish divergences have therefore produced their technical rebound effect, I present to you a very relevant one on the chart below.

The latter reveals the weekly curve (the points are updated every weekend, this graph therefore has a medium/long-term range) of the percentage decline in the price of bitcoin since its old historical high (ATH for All Time High). On this curve you can observe the presence of an excellent bullish divergence with the technical RSI indicator, here again it has perfectly produced its bullish effect with 28% rebound of BTC.

To give greater validity to these discrepancies, we should now see BTC break through the resistance at $21,500which is the price level before the fall of the FTX case.

Graph showing the curve of the Bitcoin price decrease percentage since its old record high

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