The Science Behind Repeating Patterns In Bitcoin
Every bear market is different, and yet follows a similar theme. That is a sense of optimism. Every bear market rally is met with optimism. Bear market rallies are interpreted as reversals when, in fact, they are bull traps meticulously structured to capture overconfident and immature investors. It’s the same with every cycle; it never changes.
If you are paying attention, you will note that some of the most prominent voices in the space are often wrong in their analysis. I won’t mention any names, but a prominent voice in the space recently predicted that BTC would surpass $80K, citing the recent pump to $74K. It’s important to keep score. If a voice is consistently wrong, you would do well to avoid it.
I recently posted that I was expecting lower levels. Bitcoin at $65K is definitely lower. However, I am expecting much lower prices. Bitcoin has only begun to break down on the bear flag formation currently in play. The cascading dump is yet to come. It shouldn’t be long before we see Bitcoin trading within the $50K zone.
How Bear Markets Play Out
Bear markets need to play out. There is no quick fix. You have to allow the process to unfold, ultimately providing lower prices. It’s the impatient and overzealous who re-enter the market prematurely and ultimately pay the price. You have to be aware of the structure. Bitcoin spends more time going up in a bear market than going down.
This might sound strange. However, the downward price action is significantly stronger than the upside. Bitcoin might trade modestly higher over a period of a few months, only to collapse by double digits in percentage points in a matter of days. That’s how bear markets work. Many are fooled because Bitcoin is up over a multi-month period. However, it’s just a bull trap.
The structure of a bear market is always the same, made up of multiple bull traps. If you study the previous bear market, you will discover that it is very similar to the current structure that is unfolding. Hopefully, it doesn’t go as deep. However, the structure is almost identical. Patience is a very important part of the process. You have to allow Bitcoin to unwind.
There is a winding up in a bull market and an unwinding in a bear market. The strength of these dynamics is unmatched. You cannot fight the bullish momentum in a bull market, just like you cannot fight the reverse momentum in a bear market. Your best chance is to align yourself with the momentum. Sometimes that includes sitting on the sidelines.
I know I have missed a few good trading opportunities. However, structurally, another collapse is imminent, and I don’t want to be caught on the wrong side of the market when it’s triggered. It’s a chance I don’t want to take. If the technical structure were different, it would be a different matter.
Final Thoughts
Bitcoin is teetering on the edge of another cascading event. One has to look at technical analysis. The catalyst may still be unknown. However, sometimes a catalyst isn’t required. That said, a bear flag must include a sharp, quick move down. I prefer to wait for my purple box to be reached, as it will be a good place to enter a few long trades. The market could still go lower. However, I expect that level to be relatively safe. All the best! See you next time!