The bottom is in
Bitcoin has seen a big drop all the way from 69k dollars with a market cap of $1.3 trillion all the way down to 17.6k dollars with a market cap of a mere $335 billion. Some people shit their pants and sold all their holdings at these low levels. Most of us knew, this time around, that the bottom would be around the 20k zone. We learned from the past cycles and are starting to understand the way Bitcoin behaves. In this article I give my speculative views on why I think the bottom was in and Bitcoin won’t drop much lower.
The Fed
The recent rate hikes had a lot of impact on the market. Paired with a looming recession that was still bound to happen from the COVID period and the unreasonable fear of a third World War creeping up on many, markets started to move into bear market territories. Many institutions and investment banks started to offload their higher risk assets. Bitcoin was suffering because of this. In the next 6 months to a year I believe the Fed will stop raising the interest rates and the market will start to cool down. The rate hikes are priced into the markets by now and that’s one of the reasons I think we might start seeing some upside soon. COVID is mostly over, we might see a small hick-up when it gets colder outside, but we most likely won’t be seeing another lockdown that shuts down our economy and gives even more supply chain issues(at least I hope). The Fed is battling inflation, is discontinuing the heavy money printing and aren’t pumping as much into the market as they did before. All the different problems we have seen in the last two years are perfect for Bitcoin because everything that’s happening right now is what Bitcoin was made for. We have seen it function as a immutable and un-censorable peer-to-peer cash system as it saved many Ukrainians money. And we also saw Bitcoin rallying 1700% since the COVID bottom and it is still up 460% right now, if that’s not a protection against inflation then I don’t know what is, the best store of value ever. In the next months we will see Bitcoin used more and more as a protection and I think BTC will likely go up in value.
200WMA
Most of us know that the 200 week moving average has worked perfectly as one of the indicators for a bear market bottom. Once again we hit it and we got a wick below it. The 200WMA worked as a great support and we saw a nice bounce of it. If BTC holds at these prices it is once again validated. For me this was a great indication to buy with all the money I had saved up for this particular event. We hit the 200WMA exactly as I had planned it months ago. Projecting ahead what could happen let me save up cash for the moment we would hit the 200WMA. Together with the shorts I had placed and the Bitcoin I had sold around the all time high I was able to accumulate a nice stack of Bitcoins during this crash. We saw Bitcoin invalidate the theory that we don’t go below the last all time high, this shows once again that models are just models and eventually they will be wrong. In my opinion there is a very easy explanation for this occurrence though. Because of the climate we were in during this cycle BTC wasn’t able to go to it’s full potential. Based on models and past cycles Bitcoin was a bit underextended and should have gone higher the second peak. This would eventually lead to the bear market bottom being a bit higher up as well. In that scenario, which should and could have played out if the climate in the world would have been different, we would have not seen Bitcoin go below it’s last all time high and we would have seen Bitcoin touching the 200WMA later in the year.
BTC.D
We are finally seeing the BTC dominance going up again. It bounced in its support region and started heading up. We are seeing a nice flush of alts, Luna got obliterated, UST is also gone from the top coins. There is a lot of FUD around altcoins, Solana might be the next coin to go. A bear market is always good because it gets rid of the shitcoins and useless altcoins and people that have just joined this cycle will start to realize that Bitcoin is one of the few coins that is actually worth buying. The altcoins are giving BTC room to grow because they have once again failed at doing anything except of being hyped. The last time the dominance started going up from dropping hard was in January 2018. After we saw this move up in dominance, BTC rallied from 3400 dollars to 69000 dollars. Historically the dominance has been decreasing, but every time it goes up it has been a good sign and indicates that people are starting to appreciate BTC over alts.
Halving cycle
The first picture I used for the 200WMA also has the Bitcoin halving's drawn in. These give a good indication on where we are in the cycle. We have seen BTC bottoming out, 360, 400 and 500 days before the next halving. The cycles are lengthening, bear markets are getting longer every time. The next halving will be in April of 2024. That is roughly 680 days from now, so we would be getting a longer bear market which has happened every cycle. As I stated earlier Bitcoin behaved differently this time around and should have found its bottom later in the year, that would have put us at maybe 550–600 days away from the next halving. In the past we have seen Bitcoin breaking its old all time high roughly 200 days after the halving. If Bitcoin continues this pattern we would be seeing it breaking 69k around the end of 2024 or early 2025, after that it will be off to new highs where we will most likely see a 100k finally!!
DCA
I choose to DCA into Bitcoin starting at the 200WMA. I first put in a big chunk of cash to get this low price and over the next months in the bear markets I will DCA every week into Bitcoin. Once Bitcoin breaks its old all time high I will probably stop buying into it and will start looking for my exit. If everything plays out as I have explained in this article this will be one of the best strategies out there and will not bring a lot of risk with it. I personally also went in with a bit of leverage around 18k to get some extra returns but this, of course, increases the risk.
We are lucky
In 2 years everyone will be telling those that bought at these prices that it was just luck. When the scenario doesn’t play out everyone will be laughed at. For me personally it’s worth the risk. If you truly believe in Bitcoin long term and haven’t bought at these prices then it might be a good idea to look at some more models and think about your view on the market. I just gave you guys some basic models in this article to confirm my stance but there are many other models and on chain data that confirm this theory. Maybe there is something I am missing or these scenarios won’t play out, so if you have a different view let me know in the comments. For everyone holding BTC I hope this plays out and we can accumulate as many Sats along the way! Goodluck to all.
Everything mentioned in this article is not financial advice and everyone should research and think for themselves:)!
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