23 Απριλίου 2024

STUDY: What Bitcoin Divergences Show Us About the Future: New Highs or Bear Market?

STUDY: What Bitcoin Divergences Show Us About the Future: New Highs or Bear Market?

26 March 2024

Let’s analyze the divergences of Bitcoin’s price relative to its long-term 200-day Moving Average (MA) during significant peaks that occurred after rapid upward movements in a relatively short period of time. I’m sure everyone remembers the rapid, parabolic rises of Bitcoin.

  • At the end of 2017, which was an ATH for a long time, Bitcoin’s price reached $20,000, while the 200-day MA was at $5,300. This means that the price was 3.77x above the 200-day MA.
  • In 2021, we had two major peaks and ATHs, the first one around April and the second one at the end of the year. In the first major peak of 2021, Bitcoin’s price reached $64,863, while the 200-day MA was at $32,514. This means that the price was 1.99x above the 200-day MA.
  • In the second major peak of 2021, at the end of 2021, which barely managed to set a new ATH, Bitcoin’s price reached $68,790, while the 200-day MA was at $45,658. This means that the price was 1.51x above the 200-day MA.

It’s worth noting here that in the second major peak of 2021 and new ATH, the multiple was lower than that of the first major peak of 2021, because the up-ward path to the first major peak had also affected the 200-day MA upwards.

Today (March 2024), at $73,750, Bitcoin reached a 1.85x upward divergence from its 200-day MA. This means that it was slightly below the multiple of the first major peak of 2021, which was 1.99x.

This data suggests that today, March 26, 2024, we have seen the ATH and it will not be surpassed, or if it is, it will be surpassed only marginally, maybe reaching $75,000. The size and depth of the Bitcoin market does not allow it to escape, for example, 2.00x above its long-term 200-day MA.

Some will say that in the major peak of 2017, it had a multiple of 3.77x, and they dream that something like that could happen today (i.e. it could continue to run and set new highs). The key difference that this happened in 2017 but cannot happen today or in the future, is precisely the size and depth of the Bitcoin market: in 2017, very few people worldwide knew about Bitcoin and were speculating on it – the market was extremely “shallow”, and only in extremely “shallow” markets can such scale upward divergences occur.

In 2020-2021, a global promotion was developed by Bitcoin maxis and Bitcoiners in general (see, Soon Lambo, Have Fun Staying Poor – HFSP, inevitable, Bitcoin fix this, laser eyes, etc., etc.), which on the one hand led the whole world to learn about Bitcoin, and on the other hand, many people who had learned about it speculated on it. Thus, two major peaks and new ATHs were achieved in 2021, within the same year. The BTC market has now deepened – which is why the maximum multiple of Bitcoin’s price relative to the 200-day MA reached 1.99x, compared to 3.77x of 2017.

Today, at the end of March 2024, the Bitcoin market is even wider and deeper than in 2021, not by much but definitely more. This, by common sense, implies that it cannot achieve a multiple relative to its 200-day MA that would reach, for example, 2.00x (that would mean a price of $84,460).

By common sense, it seems more likely that Bitcoin’s divergence today relative to its 200-day MA should be smaller than that of the second major peak of 2021, when it was 1.51x. The 1.85x that was recorded in mid-March is already “significantly” larger, and this, based on probabilities, indicates that Bitcoin is unlikely to reach new, higher prices. In fact, the chances of it entering a bear market, after some fluctuations of course, are very strong – a bear market that may have already started.

Now, you have the data and the facts – act wisely.

Panayotis Sofianopoulos
26.03.2024

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