Bitcoin Is Mirroring 2018 Bear Market Recovery

Bitcoin is moving in eerily similar ways to previous cycles, but could it be too early to call time on the bear market?

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This year’s bitcoin rally bears an uncanny resemblance to the 2018 bear market. The price of bitcoin (BTC) is even clawing back losses in a similar fashion.

Bitcoin sank from just under $20,000 to less than $3,200 in 2018 — a 84% drawdown. In late 2021 and throughout last year, BTC dropped below $16,000 from more than $69,000, a 78% collapse. 

According to research unit K33, both cycles lasted for about 370 days and recovery trends were identical: 60% return in 510 days. 

Beyond the usual caveat regarding past performance being no indication of future results, K33 said in a recent note the similarity between 2022’s and 2018’s drawdown is “staggering.”

So, if the 2018 bear market ended after 556 days from the 2017 peak with a 34% decline, K33 believes bitcoin could muster a rally to $45,000 by May 20 — a 50% jump from here. If history repeats, that is.

The black line (current cycle) is tracking previous cycles

K33 suggested the resemblance between cycles could come down to the psychology of the typical BTC holder. “Committed long-term holders are still unwilling to sell at a 60% drawdown from the previous peak and use these periods as accumulation periods,” the firm said.

Recent crypto performance can still be attributed to two factors: the banking crisis and increased utility, Dan Weiskopf and Mike Venuto, co-portfolio managers of Amplify’s blockchain-focused ETF BLOK said in a recent report.

The advent of Bitcoin inscriptions (Ordinals) may inject a further $5 billion in incremental value into the ecosystem, the pair said, which would provide increased revenue to miners over the long term.

Our current macro environment also appears consistent with past rally patterns and fundamentals, per Weiskopf and Venuto.

Bitcoin has an ability to rally during economic crises, they said, pointing to the Cypriot financial crisis in Greece in 2013, Brexit in 2016 and more recently, the economic turbulence resulting from the pandemic in 2020-2021.


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