Bitcoin has rallied over 300% since its bottom in mid-December 2018.
However, Altcoins have continued to shed valuation throughout 2019, with the exception of outliers such as LINK or REN.
So are cryptocurrencies in a bull market?
Here’s the answer:
Bitcoin is in a bull market, whereas the majority of Altcoins have remained in their extended bear trend.
This makes sense.
Historically speaking, every time Bitcoin started its new bull market — Altcoins suffered.
Bitcoin would gain in Market Dominance at the expense of Altcoins.
That is, market participants would sell Altcoins in order to catch and enjoy the new Bitcoin uptrend. This mass psychology would pose buy pressure on Bitcoin and a resulting sell pressure on Altcoins.
A new wave of interest in Bitcoin
Above all else however — Bitcoin is enjoying a new wave of interest.
Companies such as AT&T and WholeFoods are accepting Bitcoin.
Microsoft announced it is building on the Bitcoin blockchain.
Baakt trading is scheduled to launch later this year and Facebook’s “Libra” has attracted a fair amount of attention towards Bitcoin and Cryptocurrencies.
Bitcoin is clearly enjoying a new wave of a interest and this has coincided with the new Bitcoin Market Cycle.
Let’s look at some of the technical reasons that confirm that Bitcoin is in a new bull market.
The Bitcoin Market Cycle
Throughout its price history, Bitcoin has experienced the highest of highs and the lowest of lows.
Exponential 11,000–312,000% booms.
And 80–93% busts.
These booms and busts have a cyclical nature.
A ranging period is typically known as the accumulation phase.
This phase is a transitional period in price action where the downtrend slows in its momentum as sellers reach a point of exhaustion and buyers (i.e. “bargain hunters”) begin to gather in strength through accumulation of the deeply retraced asset.
One useful way to think about a ranging period is to imagine it as a “non-trending” time in the market.
If a “downtrend” is where price decreases and an “uptrend” is where price increases — then a “non-trend” is the period where a downtrend culminates in capitulation, price later meanders for weeks or even months within a defined price range before breaching the top of the range to begin the new trend.
If we take a look at the last 5 years of Bitcoin’s price data above — we’ll notice distinct downtrends, ranges, and uptrends.
The downtrends begin at the top of the previous uptrend and culminate at the bottom of the downtrend.
As soon as the bottom of the downtrend is in — the ranging period begins.
One very important element of a ranging period is its Range High (i.e. the top of the range, the top of the purple boxes on the chart).
A Range High is typically a level of strong sell-side pressure and resistance.
Which is why it strongly rejects price whenever price reaches it.
But once the Range High is broken — price begins a new exponential uptrend to kickstart a new bull trend.
In the chart above, there are two ranging periods showcased: the 2015 and 2018/2019 ranging periods.
In 2015 — the Range High was $313.
On the other hand, the Range High was $4,140 for the ranging period that spanned from December 2018 to April 2019.
In each of the two ranging periods, the Range High resistance strongly rejected price three times. Ultimately both were breached on the fourth attempt.
Every time Bitcoin breached each of these key Range Highs, it would begin a new uptrend and wouldn’t look back.
A new uptrend emerges when price leaves the accumulation range.
The accumulation phase for Bitcoin in this new Market Cycle was between $3,130 and $4,140 and was breached on April 1st 2019.
April 1st marked the day that the new Bitcoin bull market was born and Bitcoin has rallied over 300% ever since.
Bitcoin’s 84.5% retrace in the previous bear market
Bitcoin’s price history reveals the crucial importance of a Range High breach in kickstarting a new uptrend.
But for a ranging period to first form — a downtrend has to come to an end.
The 2018/2019 accumulation phase formed after 51 weeks of downtrending price action, where Bitcoin’s price retraced by 84.5%.
But by the standards of all of Bitcoin’s historical retraces — that’s quite an average correction.
Here is a brief history of all of Bitcoin’s retraces:
Bitcoin’s history of retraces:
2011–2012: -93% retrace
2012–2013: -80% retrace
2013: -86% retrace
2018: -84.5% retrace
Deep retracements in Bitcoin’s market valuation are not out of the ordinary.
But what tends to happen after every such retrace is that a new exponential bull trend begins.
That is, every Bitcoin bull market is preceded by a retracement in Bitcoin’s price of at least -80%.
The amount of Bitcoin that gets created every 10 minutes gets cut in half every four years.
This occurrence is known as the Halving.
The next Halving will be Bitcoin’s third and will take place in May 2020.
People tend to “buy the hype, sell the news” but the Bitcoin Halving is a unique type of event that spurs significant growth in Bitcoin’s price both heading into the event as well as after the event.
After all — scarcity enhances value.
Historically, Bitcoin tends to begin its new bull trend at least a year before its Halving.
The Bitcoin Halving will be the focus point in my next article.
Market Cycles are never copy-paste versions of themselves.
They always vary.
This is observable based on how long the accumulation phases for Bitcoin have tended to last or how deep the corrections have been in the past.
History tends to repeat itself but always with a slight twist.
What never changes are the fundamental shifts in human psychology that underpin Market Cycles and kickstart Bitcoin bull markets.
And it is this psychology that has led to similar retraces in each of Bitcoin’s Market Cycles — for the same reason that Bitcoin has made a new All-Time High in each of its Market Cycles.
And the reason is this:
Humans are predictably irrational.
And the cyclicity of Bitcoin’s price history is a testament to that.
Thank you for reading.