Bitcoin Rally Again: What You Need To Know (BTC-USD)

Bitcoin (BTC-USD) is the best performing asset of our lifetime. Given Bitcoin’s impressive history of returns below, the most important question for any investor in the market today is whether this gravity-defying asset can do it again.

Bears want you to focus on the -77% bear market because they have all four major pullbacks that Bitcoin has experienced. You won’t hear a Bitcoin month admitting the truth, which is that Bitcoin has broken every stock performance record in 15 short years.

However, there is substantial evidence that Bitcoin is stronger today than it was during the previous three downturns. The reason you can’t ignore it is that – despite the steep +80% selloff, Bitcoin has recovered to new highs every time for 3.5 years. Therefore, it’s not just the size of Bitcoin’s gains that places it as the #1 asset of all time, but the speed at which it’s happening.

I want readers to be armed with facts, not emotions. and what I present below is the culmination accurate call history New quantitative level information provided by Wealth Umbrella’s Vincent Duchaine, which I’ve done on Bitcoin in the past and created an automated buy/sell signal on Bitcoin using on-chain measurements.

A Quick Note on Crypto Panic

Below is a historical illustration of how quickly Bitcoin regained its all-time highs on previous dips.

The average time for Bitcoin to recover from its all-time high is between two and three years, with a maximum time of 3.5 years. The chart shows the maximum decline for each bearish cycle in red, followed by a recovery in green.

Keep in mind that even after an 80% decline, a stock or asset would need to rise 400% to break even. Qualcomm, for example, suffered a similar decline in the dot.com bust. It took nearly 20 years for QCOM to recover from its 2000 high. Another darling of the late 90s, Cisco, never quite reached the top of the 2000s.

This asset came to market during the Great Financial Crisis and, unlike most tech companies in the market today, not only survived the economic downturn, but also found traction in 2009 when tech weakened to withstand macro pressures.

On January 3^rd, the bitcoin network was created in 2009 when Satoshi Nakamoto mined the starting block of the Bitcoin chain. The coin base of this first block bore the text “The Times 03/Jan/2009 Chancellor ahead of second bailout for banks”. This entry refers to the published title The Times and has been interpreted as both a timestamp and commentary on the instability created by fractional reserve banking systems. Bitcoin has quietly begun to disrupt the centralized banking system, previously unthinkable, at a time even more uncertain than the one we face today.

One reason for this is that Bitcoin has succeeded in becoming a global store of value – something that only a few currencies/commodities have achieved. Many have argued against this claim based on bitcoin’s volatility. Those who make this claim fail to see that the two most popular stores of value – the US Dollar and Gold – have terrible records.

Gold coincided with a ~45% decline in 2022. It took almost 10 years for gold to regain that high it couldn’t hold. As of today, gold is about 8% below its 2011 high. The US Dollar is arguably the worst store of value. It has lost 97% of its purchasing power since 1913. Bitcoin, on the other hand, is up more than 28 million percent since it began trading in 2010 and has recovered from bearish periods in a relatively short period of time. It’s no wonder that citizens of emerging markets — facing hyperinflation — love this store of value.

This particular utility in Bitcoin is further supported when we relate cryptocurrency adoption to a given country’s level of corruption and/or monetary instability. For example, the countries where cryptocurrency is most widely accepted are Ukraine, Russia, Argentina, Turkey, and Brazil.

For these people, Bitcoin offers a secure and efficient way out of the chaos of inflation and the centralized manipulation of their personal earnings. In fact, the lofty goal of Satoshi Nakamoto’s October 2008 white paper offering an exit from the fiat system has manifested itself in real time today.

Bitcoin’s Upcoming Rally – What You Need to Know

There are no earnings reports, management overhauls, or supply chain disruptions that could affect the price of Bitcoin. Any time people come together in a coded arena and start actively trading with safety instincts, patterns develop in price history. Therefore, we need to gauge sentiment to determine what Bitcoin will do next.

One of the simplest patterns to gauge is when an uptrend moves up 5 waves, then corrects down in a 3 wave pattern. After getting 5 waves up and 3 down, we repeat this pattern fractally. Right now, we only have 4 waves since the 2018 low, which means we have another 5th wave push before the bigger bull period ends.

I want to make a few points about the above graph. We have a very complete and filled corrective pattern from the top of 2021. Recently, Bitcoin dropped the FTX (FTT-USD) scandal, which provided the first bullish divergence on the weekly chart since the beginning of the bear market in 2021. This is when the price falls less rapidly. This tends to mark the near end of major declines.

Another of my favorite examples can be found in the damped oscillator below. It simply measures the difference between two moving averages, and when set over a seven-year period, it tends to give very interesting signals. Most importantly, the oscillator is currently finding support at its 2018 low, and the oscillator is now establishing a new uptrend. When a new uptrend is established, this oscillator will tend to establish this new uptrend at the previous bearish lows that are now ongoing.

The chart below shows a common early warning sign of when the trend has reversed. The descending red line on the chart is a 45 degree angle and has stopped every recovery attempt since 2021. Once we recover this angle, it will mark an early and meaningful change in trend. Currently, this level is around $18,100.

Chain Analysis

This conclusion is further supported by on-chain analysis, a field of study that ignores price action and instead looks at the fundamentals, utility, and transaction activity of cryptocurrency and blockchain data.

Dr. Vincent Duchaine of Wealth Umbrella is an artificial intelligence and machine learning engineer. His team spent several months analyzing on-chain metrics within the Bitcoin ecosystem to create an automated risk-on/risk-off signal for retail investors. Vincent said most of the on-chain metrics his team analyzed point to Bitcoin forming a major bottom.

Most indicators suggest that we could already see it at $15,500, while other indicators suggest that we could see the price drop to $13,200 with a recent bounce.

Here are some examples of chain metrics from Wealth Umbrella that provide rare signals seen only at major lows:

Shown belowthe supply of bitcoin has not changed in over a year and barely affected by the FTX scandal. Even after the recent decline, Bitcoin supply is near record highs of around 67%, and again, that level hasn’t changed in over a year.

Previous major events, such as the February 2014 Mt. Meanwhile, the fear of FTX reduced this value by only 0.81%. Ultimately, what this tells us is that fewer market participants are now willing to sell their Bitcoins, which has historically put a floor under Bitcoin.

The last decline was accompanied by a new significant jump stock market exits. Despite the price drop, this indicator did not reach a new high, which indicates that fewer and fewer people are willing to sell their Bitcoin.

This kind of behavior was observed in bottoms (especially in 2015). It’s also worth noting that June’s increase was also in the same range as the 2015 trough and higher than what we saw in 2018.

Another interesting indicator Bitcoin percentage of supply retained in profit for last active addresses 7 years. This is useful for mitigating the effects of long-term HODLers or lost supplies. Here we can see that we are now getting pretty close to the all-time low with ~30% of the supply held in profit, which is the type of capitulation that marks meaningful lows.

In general, most on-chain metrics from any layer of the Bitcoin ecosystem provide rare readings that tend to flash at major bottoms. Until these metrics recover, it’s hard to say for sure if the bottom is over or if we have more to go in this correction.

One data set that suggests we may be headed lower is the correlation between the market price of Bitcoin and the Thermocap. Thermocap is a more realistic tool to calculate the size of Bitcoin instead of using Market Cap. It was first introduced by Nic Carter in 2018 and is the aggregate amount in USD of the revenue that miners earn for securing the Bitcoin network. This can be calculated by summing the value of each of the approximately 19 million existing Bitcoins to the price at which they were issued. Using this metric, lost coins and static coins, such as the 800,000 coins mined by the mysterious Satoshi Nakamoto, are counted in the total supply at their original minted price.

Wealth Umbrella has found that Bitcoin’s price relative to Thermocap is a great way to identify high value zones that tend to mark lows. We’ve recently entered that zone, which is rare, but it’s possible to get deeper lower support into that value zone. However, this indicator, based on previous extreme lows, suggests that the current decline could see us head towards the $13,000 region before making this meaningful low.

The result

As a result, Bitcoin adoption is increasing beyond retail interest. We are seeing more and more institutional investors, economies and businesses adopting Bitcoin. Although we are in 4th place^c into the bear cycle of Bitcoin in history, the previous 3 periods show where we are, that there is a rare buying opportunity. There is ample evidence to support that the $15,500 level is either a key low or very close to a key low. Both technical and chain analysis support this. As Bitcoin continues to integrate into the global economy, we expect both volatility and epic returns to calm. For now, we’re content to buy Bitcoin with a long-term mindset.