- An analyst says this 2018 Bitcoin price fractal could trap bulls and drive BTC down to $25K
- Despite a recent sharp recovery, the eerie fractal threatens to send Bitcoin’s price to $25,000 in the coming weeks.
- Due to an eerie fractal from 2018, a recent price recovery in the Bitcoin (BTC) market risks being erased.
Similarities in the Bitcoin price cycle
The fractal was discovered by some market analysts, and depicts Bitcoin reenacting an inverse head-and-shoulders (H&S) pattern that preceded its price decline toward $3,100 in late December 2018. As a result, expectations that BTC’s price will fall similarly in 2022 may grow.
This is due primarily to the striking similarities in price trends between the price downtrends in 2018 and 2021-2022. For example, Bitcoin formed two higher highs around $10,000 in April and May 2018 before falling below $6,000 in July while constructing the H&S pattern.
Interestingly, Bitcoin experienced an identical price trajectory from October 2021 to February 2022, forming two higher highs — near $65,000 in April and $69,000 in November. Later, in early February, the price corrected to below $33,000 while forming another H&S pattern.
Because IH&S is a bullish reversal pattern, BTC is now looking for a breakout move towards or above $50,000. According to a similar technical setup shared by market analyst Lark Davis, Bitcoin will rise above $60,000.
#bitcoin forming a potential inverse head and shoulders pattern with a price target over 60k.
Valid on break of orange line which is just beyond key area of resistance.
— Lark Davis (@TheCryptoLark) February 16, 2022
Bulls may be trapped by the 2018 Bitcoin price fractal.
However, a rise to $50,000 or even $60,000 may not be enough to lift Bitcoin out of its current bearish trend. If the 2018 fractal repeats itself religiously in 2022, BTC’s chances of falling below $25,000 appear to be increasing, as illustrated in the chart below.
Notably, Bitcoin broke out to the upside after its H&S formation in 2018, reaching nearly $10,000.
BTC’s price briefly reclaimed its 50-week exponential moving average (50-week EMA; the red wave) as support as a result, only to break below it later. As a result, the price fell further, reaching the 200-week EMA (the blue wave) near $3,000, where it bottomed out in December 2018.
Using the same fractal to the current price action, Bitcoin could end up closing above its 50-week EMA and eventually reaching levels in the $50,000-$60,000 range. Nonetheless, it will fall back below the red wave and continue to fall towards the 200-week EMA, which is close to $25,000.
The bearish outlook is consistent with what Ari Rudd, an independent market analyst, stated on Twitter on February 14.
According to various analysts, the chartist cited Logarithmic Fractal Growth and moving average ribbon supports, implying that BTC’s price may fall to the $24,000-$27,000 range in the coming months.
Not another year in 2018?
On the plus side, Bitcoin has been advancing against more optimistic fundamentals than in 2018. Notably, the price of BTC has risen from less than $4,000 in March 2020 to as high as $69,000 in November 2021, owing to an increase in retail and institutional adoption spurred by macroeconomic risks such as higher inflation.
Inflation hit 7.5% in January. Highest in four decades. It continues to accelerate.
The best way to shield yourself from this pernicious, silent tax on your life’s work — your blood, sweat, and tears — is bitcoin.
— Cameron Winklevoss (@cameron) February 10, 2022
Bloomberg Opinion’s John Authers writes in a November 2021 opinion editorial that headline inflation, the consumer price index (CPI), has risen roughly 28 percent in the last ten years. However, denominating the same metric in Bitcoin resulted in 99.99 percent deflation. The mathematics, however, came with a warning.
“Congratulations if you invested your entire life savings in bitcoin a decade ago. Should you do it right now? Perhaps not,” Authers wrote, adding, “Over the last ten years, bitcoin has delivered a lot of deflation, including 76 percent in the last 12 months alone, but also a couple of terrifying episodes when annual inflation ran at more than ten percent.” “”A hundred percent.”
Surprisingly, the “terrifying episodes” took place during the bearish cycles of 2015 and 2018.
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.