If there is one thing everyone is buying right now, it is that Bitcoin (BTC) has bottomed just like it did in 2015 after it formed a blow off top. It is very tempting to believe that we are in that part of the cycle because the ongoing cycle resembles that cycle in many ways. However, there are some stark differences that traders and analysts seem to have ignored due to their strong bullish bias. Before we discuss those, let us analyze why BTC/USD might be printing another 2018 styled bear trend. If we look at the 4H chart for BTC/USD, we can see that the manner in which it has rallied the past few weeks is no different than how it rallied in late 2017. Interestingly, it also seems to have topped out in a similar way after the recent parabolic growth.
Both the bulls and the bears are expecting a correction of some sort. However, to the surprise of both, this could be another long and boring correction that might see the price repeating the same fractal that it printed in 2018 but on a smaller time frame. Even though this is likely to occur on a smaller time frame, it is still not likely to come to fruition before September, 2019. We might see a lot of bears giving up on their sub $3,000 targets while the bulls will become more confident expecting a rally and thinking the bottom is in. We have mentioned in our previous analyses that even under the bullish case, Bitcoin (BTC) has to retrace to the 61.8% Fibonacci retracement levels which comes down to a price target of $5,156. So, both the bulls and the bears know that the price has to come down in the near future regardless of where it ends up from there.
In our previous analyses, we have discussed how BTC/USD has not even capitulated yet. This weekly chart for BTC/USD forms the basis of most of our bearish biases. As long as it is not invalidated, we will remain more bearish than bullish on Bitcoin (BTC) short term. First of all, let us look at the price of Bitcoin (BC) between 2012 and 2015. We can see that BTC/USD was trading atop a strong trend line support that was tested multiple times and it held until being broken at the beginning of 2015. When this trend line was broken, it turned from support into resistance. BTC/USD then found a new trend line support and it continued to rally from that trend line support until it ran into the previous support turned resistance. That is where it topped out and began its downtrend.
This is where it gets interesting. Those that are expecting the beginning of a new cycle from here should ask themselves where they expect BTC/USD to top out next. Do they think BTC/USD will use the same trend line support to run into the same trend line support turned resistance as last time? If so, they must realize that this has not happened before and it reasonable to expect that this will not happen because Bitcoin (BTC) will keep on seeing a decline in its rate of growth. As the market cap of Bitcoin (BTC) grows, we will see longer cycles with slower rate of growth. So, I hold that BTC/USD has to break below its current trend line support first in order to bottom. This trend line support will then serve as trend line resistance during the next cycle.