Bitcoin, time to jump on the BTC train?

To begin with, you must understand that I am not in any way positioning myself in a situation of buying advice. Yes, to you who read these lines, I let you choose if the king of cryptocurrencies (or the queen for that matter, a little feminine in this still very masculine field) is a good investment and especially: if you should buy it now. But don’t worry, CryptNaAb is here, sit back, have your coffee or tea, and enjoy the next 5 minutes. We will review the long term indicators of Bitcoin (BTC) to determine if the trading professionals (not us) would buy at this price.

Disclaimer: This article does not constitute investment advice or an invitation to invest. It is strictly for informational purposes only. You are solely responsible for the trading and investment decisions you make.

Bitcoin (BTC), where do we stand?

Before looking at the future of Bitcoin, it is useful to look at its present and its past.

Bitcoin, the most profitable asset in human history!

We have to say that we have come a long way, a very long way indeed! Since 2010, Bitcoin (BTC or XBT for the dinosaurs in the back of the class) has gone from $0.03 to $69k in 10 years. This makes it the most lucrative asset in history with a growth of 229,999,900%!!!

To tell you, our famous CAC 40 speciality of France, has gone since 2010 from 4045 € to a maximum of 7384 € or 82.5%. Yes … yes … it is not so young …

Okay so let’s take Amazon which has made at its peak ~ 208 911% since its IPO in May 1997. Which is already huge, but we’re talking about a performance 1100 times lower than Bitcoin over a period of 2 times longer…

(Note: for Amazon, given the split, we are talking about a share price of $0.09 at its launch and $188.11 for its ATH, this is just to simplify)

Bitcoin, a small growth of 2,300,000% on the meter!
Bitcoin, a small growth of 2,300,000% on the meter!

You will say to me, what is the report? Indeed, there is none, at least not directly. What makes Bitcoin perform is its volatility and therefore its bull and bear cycles.

4 Bull runs, when is the next one ser?

We have had 4 major rallies. One in 2011 then 2013 then 2017 and finally more recently in 2021. These rallies, called Bull-Market, are always followed by a sharp decline that we call in the sector a Bear-Market (editor’s note: yes, we feel a bit like farmers in finance, a repressed passion perhaps?)

On our first logarithmic scale chart tracing BTC’s history, we can see a channel forming (the blue lines on the picture above).

Bull-Markets will generally touch the top of the channel and Bear-Markets the bottom of the channel.

One point you can see right away is that we are on the bottom of the channel. Well, well…

So is it time to buy Bitcoin (BTC)?! Will I finally become rich without taking any risks?

Wait, calm down. Here, I’m talking only in terms of Technical Analysis (TA) and therefore of what I see on the chart and not of the technological aspect of the future: which we call Fundamental Analysis (FA).

Ready to dive into the world of TA and see some indicators? Let’s get started!

The bottom of the long term channel (logarithmic scale) – The rebound is expected

As seen on the chart above, here zoomed in on the rally from January 2019 to October 2021, we are very close to the bottom of the channel that has always supported the price of Bitcoin, a break will mean a change of BTC’s overall dynamics!

A long-awaited rebound
A long-awaited rebound

Some may consider this as a potential buying area. Will they be right? The future will tell.

The 200 Moving Average – Long-term support never broken

Here, on a weekly scale, the 200 moving average (which is simply the average of the Bitcoin price over the last 200 weeks) is an area that has always provided support in the past. Some will use this as a reason to locate a long term buy. We can observe that we have settled below it, which has never happened before.

“Liar,” you said? And you are right, in March 2020 we had a Black Swan event, that is, an unexpected event that has a strong impact on the markets. You guessed it here, the Coronavirus (Covid-19). That’s why I’m taking the liberty of removing it from the analysis.

Bitcoin's long-term support
Bitcoin’s long-term support

The exchange zones – The location of the fight

They are represented on the right side of the chart by blue and yellow columns and represent important trading areas. That is to say, areas where there have been many buyers and sellers.

These areas are usually supports for the price (if it is above) or resistances for the price (if it is below). Thus, they support it in one case or push it back in the other.

Here, we can see that our big support zone is lower, around $12k. Knowing that the price is moving around $20k right now (August 2022), this would give us another 40% drop!

A possible drop to k
A possible drop to $12k

Fibonacci’s retracements – Maths at the service of the people

Fibo who? Leonardo was a pretty hot guy in mathematics. We used his sequence (0+1+2+3+5+8…) to make retracements of the price and often it matches rather well!

Here, with a logarithmic display we can see something common to all cycles:

Logarithmic display of BTC cycles
Logarithmic display of BTC cycles

So, do you have it? No ? Come on, I’ll help you and draw the white horizontal lines that represent the 1st stop of each Fibonacci retracement. Basically, we rarely have fun going below this 1st stop on each cycle.

These lines always act as support and therefore support the price.

But is this also the case in a standard display (not logarithmic)?

The answer is no, in the standard display we can see that we are still in the long term buy zone below the 0.618 retracement! And even more, we went on each Bear-Market below the 0.786 retracement.

Basically, the one who bought at the high of each cycle, still saw -78.6% in his portfolio tracking.

So a retracement of this magnitude should take us below $17250.

Fibonacci communicates another very important piece of information. Indeed, if a professional wants to invest in any asset for a long term investment. This professional usually does so below the 0.618 retracement, located today at $26250.

Bitcoin retracement

Relative Strength Index (Simply called the RSI) – Entry into the oversold zone

This is a momentum indicator, or strength. It is bounded between 0 and 100. This is not the description of the indicator, it should be understood that when it is above 70, it feels strongly sell and below 30 it feels strongly buy.

So in the chart below we can see that the green buy zone always corresponds to an interesting long term zone. Indeed, the white vertical lines represent the low points of the previous Bear-Market and we can see that at this moment the RSI is in its green zone too.

RSI, are we entering the oversold period?
RSI, are we entering the oversold period?

Moving Average Convergence Divergence (i.e. MACD) – A bullish momentum

We will finish on my favorite, the indicator that I use all the time, a momentum indicator too, the MACD (pronounced “MAK-Di”). It is not limited so it can go to infinity.

It shows us what is called a beginning of divergence on a weekly chart.

Bitcoin MACD, a bullish momentum

Divergence is a sign of breathlessness.

Let’s say you set out with a large amount of sugar to climb a hill. You use a lot of sugar to climb quickly. Then you take a break. To continue the climb, you have less sugar so you eat less but you manage to climb a little higher. However, you can’t continue because you have no more sugar and therefore no energy, so you go the other way.

The price is the same, here we see that the price goes lower and lower but has less and less energy because the MACD goes higher and higher.

The sugar of our price is the buyers and the sellers. Now the sellers have less and less Bitcoin to sell. So we can either hope that the price will go up again or that it will go down one last time in order to completely empty their bags.

So Bitcoin, should we go or not?

We saw 6 interesting criteria during this article:

  • The channel🟢
  • The moving average🔴
  • The trading areas🔴
  • The Fibonacci retracements🟢
  • The RSI🟢
  • The MACD🟢

Almost all of these indicators tend to tell us that we are very close to the low point. Either we have reached it or we are not far from it. The next support being the $12k. A person wanting to buy in installments will certainly put in several buy orders between now and $10k in order to smooth out his buy price.

To go further

Everything developed here can be used in traditional technical analysis (stocks; Forex; Crypto-currencies; etc…). Especially Fibonacci which always gives very good long term indications. Of course, this remains true if the project does not disappear (like a company that would close for example).

However, this analysis does not take into account a factor that Bitcoin has never experienced. The recession.

It was created in order to combat this phenomenon, however it has not yet been able to show its potential as a store of value due to the lack of people involved in the system.

Bitcoin’s next big moment is in 2024, this event is called a Halving. All the new Bull-Runs have started by then. That’s also why we have time to see it coming and to organize what we call our buying strategy.

While you’re doing your buying strategy on Bitcoin or any other asset, don’t forget to set up your selling zones as well. We will surely come back to this point in another article when the time comes. I’ll just leave you with one important indication. The top of the channel if hit in 2024-2025 should be around $100-120k. For those who depart for an adventure, good shopping (and no, it’s still not an investment advice!) and take the time to read our guides, it will help you too.