This is a good time to remind ourselves of some of the fundamentals of how Bitcoin and the crypto market work, including its tendency to follow fairly identifiable cycles. It’s also an opportunity to point out that while it’s impossible to predict the future, studying the past is rich in lessons for the wise investor.
The bitcoin has plunged last week under the symbolic mark of 30,000 dollars, a first in more than three months, after a recall in China against cryptocurrencies and a withdrawal of the payment method at Tesla. The cryptomonies “are not real currencies,” said several Chinese banking federations of reference, warning against “speculation” in a country that is also preparing its own digital currency.
China was for a time one of the strongholds of bitcoin, the most widespread of virtual currencies. Beijing, however, made a radical turn in 2019 by making payments in cryptocurrencies illegal in the country, accused of being an instrument in the service of “criminal activities”.
Technical analysis (TA):
Technical analysis (or chart analysis) of a financial asset is the analysis of its past price pattern in order to predict market developments.
Technical analysis does not claim to be an exact science. It is often associated with a human science since its object of study is directly centered on the understanding of the psychology of the market and thus of human psychology.
The study of a graph allows us to identify phases of price increases and decreases, as well as phases of stagnation.
To explain that this phenomenon is not only due to chance, technical analysis relies on the psychological analysis of crowds, of which it claims to be an application to the markets. A market, like a crowd, can therefore be caught either in a dynamic of optimism (Bull market: period of increases), or even euphoria (Bullrun: period of strong increases), or in a dynamic of pessimism (Bear market: period of decreases), or even despair (the lowest points of the Bear market), or in full hesitation (period of stagnation of the prices or small bullish and bearish cycles in a range)
Analysis of the cryptocurrency chart:
The bitcoin price curve is unique if compared to other asset classes as cycles are very easily detected that keep repeating themselves at a regular time interval.
These cycles have a duration of 4 years, and are essentially the consequence of the algorithmic policy of Bitcoin’s money creation. Unlike fiat currencies, Bitcoin’s money creation is programmed and known in advance. Every 4 years since the first halving in 2012, the Bitcoin issue is divided by 2, until 2140. This reduction of the Bitcoin money creation creates an additional scarcity. More than 18.5 million units out of 21 million BTC have already been issued.
With each halving of Bitcoin, a moderate increase in its short-term price (bull market period) has followed, caused by the reduction in money creation, which then begins to increase more and more, resulting in a bullrun period.
We can see that the trigger for the bullrun is the break of the ATH (All time high) of the previous bullrun. Indeed, every time Bitcoin has exceeded its previous ATH, the media coverage of Bitcoin starts to grow (traditional media, social networks, word of mouth). This over-mediatization leads to an influx of new buyers, which in turn drives up the price.
The bear to market has been reached, it is now time for the price to go back up. According to some experts, the next rise will be without process! It’s time to go for it