Final Capitulation - 5 reasons why Bitcoin could bottom out at $ 10,000

Final Capitulation – 5 reasons why Bitcoin could bottom out at $ 10,000 – Mail Bonus

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Bear markets have traditionally been challenging for traders, and the traditional set of “reliable” indicators that determine good entry points cannot predict how long a cryptocurrency winter could last.

The recent recovery of Bitcoin (BTC) again over the psychologically significant price level of $ 20,000 was a sign for many traders that the bottom was in, but a deeper dive into the data suggests that the short-term rise could not be sufficient proof of macroeconomic development.

Evidence of the need for caution emerged in a recent report from cryptography research firm Delphi Digital, which indicated that “we need to see a little more pain before we are convinced that the market is bottoming out.

Despite the pain that has already been felt since the Bitcoin price peaked in November, a comparison of its withdrawal since then and the 2017 market peak suggest the possibility of a further short-term decline.

BTC / USD price standardized from historical highs (current against 2017 highs) Source: Delphi Digital

In previous bear markets, BTC prices fell by approx. 85% from top to bottom. According to Delphi Digital, if history were to repeat itself in the current environment, it would mean “a minimum just over $ 10,000 and another 50% deduction for current levels.”

The outlook for Ether (ETH) is even more alarming as the previous bear market saw its price fall by 95% from its peak to low. If the same scenario were to happen this time, the price of Ether could drop by as much as $ 300.

ETH / USD price percentage reduction (current against previous NOTE). Source: Delphi Digital

Delphi Digital said,

“The risk of surviving a similar crash is greater than most people are likely to give a discount, especially if BTC fails to maintain support in the $ 14K-16K range.”

Conditions of sale of states

For traders who are looking for where the bottom is in the current market, data show that “the previous bottom in the main markets coincided with high sales conditions.

As can be seen in the weekly chart below, the 14-week RSI BTC recently fell below 30 for the third time in its history, as two previous incidents came close to the market bottom.

BTC / USD weekly price against 14 week RSI. Source: Delphi Digital

While some may take this as a sign that now is a good time to re-enter the market, Delphi Digital offered caution to those expecting a “V-shaped” recovery, noting that “In the first two cases, BTC traded with a. unevenness aside for a few months before finally showing a strong recovery.

A review of the 200-week simple moving average (SMA) also raises questions about whether historical support levels will hold back.

BTC / USD price against 200 week SMA and 14 week RSI. Source: Delphi Digital

Bitcoin recently went below the 200-week SMA for the first time since March 2020. Historically, BTC prices have only been below this level for a few weeks in previous bear markets, suggesting that a bottom could soon be found.

Connected: Bitcoin prices fall below $ 21K while stock exchanges see record outflows

The final capitalization

What the market is really looking for now is the final submission that has traditionally marked the end of the bear market and the beginning of the next round.

Although market sentiment is now at a minimum since COVID-19 collapsed in March 2020, it has not quite reached the depths of despair seen in 2018.

According to Delphi Digital:

“We may need to see a little more pain before the feeling really reaches the bottom.

Crypto Fear & Greed Index. Source: Alternative

The weakness of the cryptocurrency market has been prominent since the end of 2021, but the real driving force behind the market collapse is, among other things, rising inflation and rising interest rates.

BTC / USD vs. Fed Funds ratio against Fed balance sheet. Source: Delphi Digital

Rising interest rates tend to follow corrections in the market, and given that the Central Bank intends to continue raising interest rates, it is likely that Bitcoin and other risky assets will adjust further.

One final measure that indicates that a final takeover event needs to take place is the ratio of BTC supply to profit, which reached a minimum of 40% in previous bear markets.

BTC / USD price against the ratio of supply to profit. Source: Delphi Digital

This measure currently stands at 54.9%, according to data from Glassnode, which adds credibility to the view that the market could still experience one foot down before the real bottom is reached.

The views and opinions expressed herein are those of the authors only and do not necessarily reflect the views of Cointelegraph.com. Every investment and business carries a risk, you should conduct your own research when making a decision.