Bitcoin (BTC) found a temporary bottom near the $20,000 big psychological number and since then the price has been consolidating in a wide range between the $25,000 resistance level and the $17,500 support level. Bitcoin has more than halved since hitting its all-time high in November 2021 however, that’s not uncommon for the price of the world’s most valuable cryptocurrency.
While in the short-term the market conditions look very depressed, the current Bitcoin price structure is recreating a pattern that preceded a record-breaking rally. The fractal from the 2014 bear market can provide us with a price model for what may lay ahead of us.
Throughout this analysis, we’re going to explore both the short-term and the long-term outlook for Bitcoin and learn how the 2014 price scenario could be about to play out.
Bitcoin Long-Term Analysis
In technical analysis, a fractal pattern represents price structures that are self-similar and repeatable. While the past is no guarantee for the future, it often rhymes because markets are cyclical in nature and patterns tend to repeat.
If we compare the bear market of 2014 with the current bear market, we can observe that the current price action mimics the same behavior. In 2014, Bitcoin entered its first major bear market which lead to a crash of about 86% from a high of $1,242 to a low of $162.
The correlation between the 2014 bear market and the bear market of 2022 is staggering, which is why we’re going to break down all the key technical elements between the 2 bear markets:
- In both instances, the bear market top formed during the month of November (November 2013 respectively November 2021).
- We have tested the previous all-time cyclical high (2013 high respectively 2017 high).
- The peaks and valleys match well enough.
- The 2014 bear market bottomed at the 0.786 Fibonacci retracement level of the previous uptrend. If the 2014 pattern were to repeat, the current sell-off can extend down to $14,933 to match the same price drop as we experienced in 2014. Nearby we also have the 2019 swing high of $13,870 which has the potential to be retested
- The 2014 bear market happened at the mid-point before the second halving event, while the 2022 bear market is at the mid-point before the fourth halving event.
If history repeats itself, we can potentially reach a bottom by January 2023, which is 13 months into the bear market. The bear market of 2014 lasted exactly 13 months, which is the average length of Bitcoin’s bear markets.
Bitcoin Short-Term Analysis
In the short term, Bitcoin price action is caught between a rock and a hard place. Bitcoin price has just broken out of a consolidation pattern (ascending channel) but since we’re still above the mid-June bottom it may lead to more consolidation.
Along with the current downtrend, BTC developed a stair step pattern where the price was moving from one period of consolidation to trend mode. Each successive break lead to around a 36% drop in BTC price.
If that pattern is to repeat again, a 36% drop will put the Bitcoin price nearby the 2019 high, which coincidently is also the same price target of the 2014 fractal model.
In summary, the 2014 fractal model isn’t 100% perfect, but can yield similar results if the price follows the same path. Despite all the similarities, what is more potentially telling is the fact that both the short-term and the long-term analysis point to the same bottom price target.
Thank you for reading!