Bitcoin Weekly: Bear Market Confirmed

Bitcoin continued selling off last week, slicing through support in the 70k area, until it finally found a bottom at 60k. There is now no question about it: bitcoin is in a bear market. It will likely go lower before it’s over, but if US tech stock regain strength, a bear market rally is in the cards.

Also watch the accompanying chart analysis on YouTube.

Since bitcoin broke down in November, I’ve drawn the weekly support area between 72k and 76k. In last week’s video update, I mentioned it could slightly overshoot to the downside, to really scare people out. I did not expect it to drop straight through support though, all the way down to 60k!

Still, I do not consider this support area to be conclusively broken yet. With breakdowns, you want to see a breakdown candle with a large body, closing well below support. That’s not what we got in this case, with the long wick to the downside suggesting that buyers stepped in.

So what does this mean? What’s next?

I can see three plausible scenarios going forward:

1. The bottom is in. This is unlikely, but if so, 60k will probably be retested before the trend turns back up again into a new bull market.

2. The bounce fails, leading to a lower low within the next few months. This would continue the 2022 pattern, but I think this is unlikely, unless the US stock market starts showing real weakness.

3. The bottom is not in, but the bounce from 60k continues into a bear market rally over the coming months, before eventually turning down into a lower low. This is my base case scenario.

I’d be surprised if the bottom is in already, and scenario number three is my base case right now. But either way, as I’ve said since the November breakdown: until we see clear signs of a bottom in the charts, stay cautious, and expect rallies to eventually be sold off.