Bitcoin Bear Market
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- There is a strong possibility that Bitcoin will soon be entering bear market territory
- A loss of $30,000 would signify real weakness in the market, driven by a negative macro environment
- What are the key levels to watch for?
Bitcoin is looking alarmingly like the bull run that started back in March 2020 could be over, especially with the Federal Reserve planning various quantitative tightening measures this year. When it comes to the charts however, what are the levels we need to keep an eye on to determine if Bitcoin is in bear market territory?
$30,000 Remains Key Level for Bitcoin
When it comes to assessing Bitcoin’s bear market possibilities, there is a very clear setup we need to pay attention to:
As we can see, the key areas are the $30,000 support from July 2021 and, below that, the prior high of $20,000 from 2017. These are the levels that will dictate whether Bitcoin is in a bear market or not.
$30,000 is the first key level, and at present it looks like just a matter of time before Bitcoin retests it. The macro environment, with the Federal Reserve preparing to reign in the spending that has typified the past two years, is bearish for Bitcoin (as we have already seen), and in many ways the run to $69,000 at the end of last year was an artificial rally caused by hype of the Bitcoin Futures ETF launch. Bitcoin’s price reaction since that launch confirms this.
If Bitcoin retests $30,000 and it still holds as support then we can be confident that the bull run isn’t over and a period of consolidation is on the cards before another rally:
If $30,000 doesn’t hold however, then what happens after this becomes crucial. A weekly close below $30,000 would almost certainty signal a bear market because of the lower low and lower high on a higher time frame, which would bring $20,000 into play:
If Bitcoin follows this path then we can expect $20,000 to act as the bottom of the market and a total loss of faith in Bitcoin, in the short term at least. How long it would rattle around between $20,000 and $30,000 is of course unknown, but if the last bear market is anything to go by then we’re talking 1-2 years, especially with cycles being longer.
If this scenario plays out, $20,000 would be the perfect accumulation area for the next rally, which would likely see Bitcoin going over $100,000. $30,000 will be the first battle ground when that time comes…whenever that might be.