Has bitcoin ended the correction?
Bitcoin’s ongoing cycle is very different from other cycles in its history. Technical indicators, on-chain analysis, market sentiment and investor expectations often differ. The different time periods often contradict each other. Because of this, many analysts struggle to clearly determine whether Bitcoin has been in a bear market or is still in a bull market.
In such a situation, it is difficult to find parallels with the previous bull markets of 2012-2013 and 2016-2017. While current market activity may seem different than it used to be, it is important to focus on the recent history of BTC price, which provides many clues as to the current state of the market.
The following are the similarities between the current BTC price action and the May-July 2021 correction. The analysis provides several arguments that the market has bottomed and Bitcoin may soon begin an uptrend.
Bitcoin Price Action
Bitcoin reached an ATH at $69,000 on November 10, 2021. Since then, the largest cryptocurrency has fallen, finding a bottom at $32,917 on Jan. 24, 2022, down 52%.
The recovery has been relatively modest so far. The bullish reversal failed to even reach the 0.382 Fib retracement level and ended at $45.821.
BTC price chart | Source: TradingView
A month later, on February 24, Bitcoin established a higher low at $34,322, leaving the candlestick below 9%. In addition, the recovery is confirmed by an increase in volume, which reaches the highest level since September 7, 2021 (blue arrow).
Analyst BTCfuel points to the importance of the recovery. In a chart posted to Twitter, he saw a parallel with July 2021 and the start of an uptrend, the end of the previous correction.
BTC price chart | Source: BTCfuel
Similarities with the summer 2021 correction
Indeed, the structure of the current correction is showing increasing fractal similarities to the summer of 2021, when Bitcoin peaked at $64,854 on April 14, followed by a sharp decline that took BTC to a low of $28,805, marking a fall of Equal to 55% and greater than the current drop.
If we look at BTC’s long-term chart from early 2021, we see a similar price action. Both Bitcoin’s high (blue) and low (orange, dash) are not defined by one-off events.
Price extremes occur in phases such as the Wyckoff distribution/accumulation phase. As a result, unlike previous cycles, the BTC histogram is constructed with a slightly curvilinear structure rather than sharp peaks/valleys.
BTC price chart | Source: TradingView
With the current correction angle, it is possible that the higher low made 2 days ago is the start of the next uptrend (orange, dashed line). Therefore, if the similarities between the two corrections are to be maintained, a bullish scenario could develop going forward.
Three stages of BTC bottoming
A closer look at the structure of the ongoing correction reveals some similarities to similar events in 2021. Obviously they have certain similarities. The minor corrections also share some similarities in the bottoming phase.
BTCfuel also published another chart of BTC in which he pointed out 3 periods of bottoming. According to him, any adjustment in 2021 is characterized by 3 phases:
- Large red candle with a long wick
- A full body red candle followed by a corrective floor
- higher ground
#Bitcoin Corrections in 2021 & 2022 all had a similar structure
Yesterday’s green candle is likely the higher low we’ve been waiting for. LET TOOOOOOOO ???????????????? pic.twitter.com/G1FJ1uHtT5
— BTCfuel (@BTCfuel) February 25, 2022
This signal suggests that a higher low could signal the end of the correction and the start of the Bitcoin rally. Commenting on this tweet, market analyst TheRealPlanC wrote:
“Many of you are probably thinking that these models are no longer relevant or valid due to the macro situation. However, time will tell.”
Realized loss shows that the correction is coming to an end
The on-chain Realized Loss indicator also shows that the current bitcoin correction is coming to an end. It also draws parallels between investors’ current loss behavior and the events of summer 2021.
Analyst OnChainCollege published a chart of the Realized Loss indicator, highlighting structural similarities.
“It could be a coincidence. Or it could be a pattern of investor sentiment during prolonged periods of decline.”
Could be a coincidence. Or it could be a pattern of human psychology during a time of enduring loss.
— On-Chain College (@OnChainCollege) February 25, 2022
On the chart we can see that in both cases there were two spikes in sales volume (green and yellow). This is followed by two smaller waves (pink and blue), with the second completing the correction. In addition, the price of Bitcoin has increased massively, with real losses kept to a minimum.
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