The king of cryptos back to harsh reality! – I have the honor of probably realizing the last market point of Bitcoin (BTC) price for the year 2022 for Journal du Coin. And it is clear that the bulls have lost their wings with a depreciation of almost three quarters of the market value of Satoshi Nakomoto’s digital currency. And at the same time, we validate the fourth bear run in its history after 2011, 2014 and 2018. Although on this topic, a debate between analysts should be initiated.
In that sense, the latest technical analysis regarding the king of cryptos unfortunately points to signals in favor of the bears, despite an easing of downward pressure in recent weeks. But on the other hand, the current uncertainty in the financial markets still lingers. With financial conditions in the US tightening at the fastest pace since the late 1950s. Especially since the FED was able to continue its monetary tightening despite the specter of recession. Which would not make BTC business for a trend reversal.
Instead of issuing projections for 2023, let’s review the highlights of the 2022 version of the Bitcoin bear run graphically to understand the market environment we are witnessing to date.
First wave of correction accompanied by a shoulder-head-shoulder
After three consecutive major weekly candles down since its last ATH in November 2021, Bitcoin has literally wiped out the gains of its ultimate run since late September 2021 by returning to $41,000. This value will become a critical level in a chart pattern so feared by many investors. After bouncing back to $52,000 by the end of 2021, the bears got their way by driving the BTC price below $41,000 to $35,000 at the end of January this year. And at the same time, a shoulder-head-shoulder (ETE) had just been validated.
In terms of the main drivers of this first wave of corrections that stand out, first and foremost was the Omicron variant, which raised fears of possible vaccine ineffectiveness. When doubts passed on this topic, we hoped for a positive reaction from the crypto king’s course. But against all odds FED froze the mood by saying so inflation in the United States was no longer so transitory. This news, which surprised investors, was on the one hand the origin of the important bearish candle for the week of November 29, 2021, when the price fell sharply from 60,000 to $41,000-42,000. On the other hand, it foreshadowed possible announcements of monetary policy tightening at the time.
Finally, compared to the Ichimoku Kinko Hyo curves, BTC’s price position did not cause concern as long as it did not go below the Kumo despite a fairly large loss for the bulls to digest.
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Ranging Between $35,000 and $46,000 – An Exposure for Bulls!
Although Russia’s invasion of Ukraine was a thunderclap across all asset classes, the king of cryptos had stood out, to everyone’s surprise, for its resilience across -one cleaned up or horizontal channel between $35,000 and $46,000. This chart situation had given hope to the bulls as its price returned to the top of the range several times. Especially since this geopolitical conflict could serve as a pretext for the FED not to start its monetary policy tightening.
Unfortunately, the US central bank did not give in to the whims of investors. Because inflationary pressures, even before the conflict between the members of the former Soviet Union, were already underway. In this context, the March 17th FOMC meeting led to a 25 basis point rate hike, which will soon be followed by others at high speed.
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Second wave of correction with disastrous consequences
This is the high point that tipped the price of Bitcoin to the dark side culminating in the collapse of Luna, Terra’s token. Because precisely that was the decisive catalyst to definitively confirm the bear run. And graphically, this upset came after six weekly candles in a row since it last dipped below $46,000 in early April.
Even worse, the consequences are catastrophic with extremely unfavorable signals. Primarily, the king of the cryptos violently exited his territory from below, validating another wave of correction in passing. Second, of the 12 weeks since the last break below $46,000, 11 ended in the red until the price stabilized around $20,000 or the 2017 ATH. And last but most significant point to remember, the price of BTC and Chikou Span finally fell below Kumo. aka the Ichimoku cloud.
In any case, the bears are in a position of strength. So much so that the violence of the second wave of correction exposed the shortcomings of an asset class not regulated by financial market authorities and subsequently caused a crisis of confidence among investors.
A technical bounce then a range around $20,000
After securing $20,000 in funding from mid-June, the price of Bitcoin begins a summer technical rebound without challenging Kumo again. Because it just stumbled below the $26,000 resistance and struggled to adequately correct the losses from the second wave of correction last spring.
As the reasons for this start had turned out to be fanciful, it took two weeks since mid-August to trash everything, much to the chagrin of the bulls. The latter had actually hinted that the FED would soon end its monetary tightening. Except that on the occasion of jackson hole symposium, Jerome Powell set the record aggressively.
Therefore a long cleaned up around 2017 ATH followed until FTX announced bankruptcy.
A third wave of correction soon?
If Bitcoin broke through $20,000 to set a new yearly low, the third wave of correction would not be of a proportion likely to signal a true bull capitulation. Firstly, the price stabilizes around $16,000. And on the other hand, FTX’s bankruptcy would ultimately only be an extension of the flaws already seen in the cryptocurrency ecosystem at the time of the Luna scandal. This may explain the punctual mini-recovery of the crypto king’s bear run since its last ATH in November 2021.
Having said that, the status quo position for the price of BTC and the Chikou range below the Kumo is locked week after week. And to make matters worse, the significant thickness of the future Kumo in weekly units could inhibit the propensities for a rebound that could worry the bears.
Assuming $16,000 still holds water, Bitcoin would be wise to successively overcome Tenkan, Kijun and $20,000 with the aim of rallying another resistance around $26,000. Conversely, we would be in continuity with the highs of the current bear run. In that case breaking $16,000 would land its price towards $12,000. This would represent a 40% decline since the 2017 ATH.
2022 is the year of the Bitcoin bear run. Could 2023 be a different kind? With leading indicators pointing to a possible recession both in the US and in Europe, an unknown about the speed of the fall in inflation and, above all, an adjustment by the main central banks regarding monetary policy tightening, things look bad for the crypto king, which until further remains a prisoner of its association with risk aversion.
Not only that, the drop in stock indices in 2022 would only be an appetizer. This would raise fears, in the event of a downward acceleration in the traditional asset class, another blow to BTC. And given that it does not realize higher highs than the previous ones with passing polarity changes from resistance to support, the desire for a neutralization of its bear market could be put on the back burner.
To avoid 2023 being a gloomy year, it would be necessary not only to overcome the resistances that make it possible to reconnect with Kumo, but to take advantage of the great catalysts that would remove the doubts about the status of Bitcoin. And as we speak, the time has yet to be determined.
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