Should we wait for the end of the bitcoin bear market?

The other day, before our eyes, a violentThe battle between Bitcoin and bears is beyond $29,000, and so far they have lost. It is possible that this event will determine the dynamics of the crypto market until the end of the summer, and maybe even the year. The market drawdown has been going on for more than two months, but the June low of BTC – $28800 – not yet overcome. The inability of the bears to push the rate deeper may be perceived by investors as a signal that the “bottom has been reached” and the market will move into a new phase.

Have the bears given their last fight?

In many ways, Bitcoin bear market May-July 2021reminiscent of the September-December 2019 bear marketof the year. From time to time, the rate of a leading cryptocurrency collapses, rebounds, stabilizes for a while, and then collapses even deeper again. Over time, the intervals between collapses increase and the depth decreases. 

Here are the major bear market crashes of 2019.

• September 26 – $8100 (from $10000)
• October 6 – $8000
• October 24 – $7500
• November 24 – $7000
• December 7 – $7200
• December 17 – $6600
• January 2 – $6900

If in September-October the Bitcoin rate collapsedquickly, then in November-December each new anti-record required almost a month of “preparation.” There were also “unsuccessful” ones along this path. collapses on December 7 and January 2, which did not set new anti-records. The failure of the bears on January 2 was perceived by market participants as a signal to buy, after which the bear market ended and the rate began to rise rapidly.

Now let's look at the major lows for 2021. 

• May 12 – $49,000 (from $57,000)
• May 19 – $35000
• May 24 – $32400
• June 9 – $31700
• June 22 – $28800
• June 26 – $30100
• July 20 – $29300

Just like two years ago, now it’s becoming more and more difficult for bearspush the course. Previous low – $28800 – was last month. The new collapse has not yet been able to update the anti-record, and the Bitcoin rate (as of July 22) rebounded above $32,000. This is the second failure of the bears. The last one was on June 26 and sent BTC to the area above $32,000 for almost a month, but a new failure could be the end of the bear market (like at the beginning of 2020). 

Belief in the fortress of the turn of 30,000

It was no coincidence that the levels of $30,000 and slightly lower turned out to bethe center of the struggle. Analysts have repeatedly pointed to this figure as the strongest bastion of cryptocurrency. It has fundamental reasons: this is approximately what BTC should cost at the end of the year if we remove the speculative component of the price. 

"Basic" price of the first cryptocurrency,determined mainly by the contribution of long-term investors (who are not ready to sell the asset and therefore prevent the rate from collapsing below a certain level), has approximately doubled every year since 2015. For example, at the end of 2018 during the crypto winter, BTC cost about $3,500, at the end of 2019 after the bear market – $7000. At the end of 2021, its estimated price should be no lower than $28,000-30,000. 

Such extrapolations do not always work.But today it is important that many analysts and investors are aware of this pattern and are guided by it, avoiding selling coins at lower prices. Moreover, the very repeated mention of this level in analytical articles led to the fact that many market participants believed that the bottom is exactly there. Therefore, they also refuse to sell.

In fact, the bears are opposed by investors’ faith in the impenetrability of the $28-30 thousand levels, and now this faith has only intensified. 

Policy influence is shrinking

An interesting feature of the recent collapse– its relatively weak connection with political events. News from China has ceased to particularly influence the market: investors have already come to terms with the fact that things are not going well with cryptocurrencies in the Middle Kingdom. The significance of the EU initiative to ban anonymous Bitcoin transactions should not be overestimated either: according to lawyers, even if it receives approval, it will be years before the relevant laws are adopted. During this time, a lot can change. Other factors in the price decline were purely economic: the collapse of the US stock market on Monday and the unlocking of 16,000 BTC by the Grayscale Bitcoin Trust on Sunday.  

By and large, these factors wereonly reasons. Having rebounded at the end of June, BTC had been trending negatively since the beginning of July, and another collapse was only a matter of time (and depth). However, it is possible that this collapse was the last in the series. It is symbolic that the “culprit” May crash, Elon Musk spoke out in support of Bitcoin on Wednesday, accelerating the recovery. 

What to expect next. Three scenarios

Not finding enough news"trump cards", the bears have not yet been able to bring the crypto market down below the June minimum of $28,800. Depending on its dynamics in the coming days, three main scenarios are possible for the coming months. 

New rally.If the BTC rate quickly reaches the area above $35,000, this may be perceived by the market as a signal to urgently buy. FOMO investors will play a significant role in this. The Bitcoin rate will return to levels of about $50,000, and maybe even update the April record of $64,000. 

Flat.If BTC gets stuck at the current $32,000, then due to the uncertainty of the bulls, it risks remaining in the $30,000-$40,000 range for a long time. Approaching $40,000 will serve as a signal for skeptics to consolidate profits, leading to a correction. 

Continued decline.If the bears take revenge in the coming days and still push the rate below $28,800, then some rebound is inevitable in any case, but the bear market will continue. In August, we may well see new lows of the order of $27,000-$28,000. 

At the moment, the second of these scenarios seems to be the most likely, but the coming days may change the balance of power. 

text: senior analyst EXANTE Viktor Argonov