Bitcoin Bottoms: The Psychology of Bear Markets
The hunt for Bitcoin’s bottom has continued since the digital asset fell below its $20,000 price level. Given that the bear market is not long in coming, it stands to reason that the bull market is not yet here. However, being able to spot when the cryptocurrency has bottomed can help guide wise investment decisions, and previous downtrends can provide insight into how it might perform.
Previous Bitcoin Bear Markets
Recent bitcoin bear markets indicate some important trends that may occur before a bitcoin bottom forms. The 2018 bear market and 2014 bear runs helped shed some light on what to look for in the crypto winter.
One of the first things to consider is how long previous bear markets have actually lasted. For the last two bears, the number of days before the market bottoms seems to be decreasing. In 2014, it took a total of 407 days to establish a low of bitcoins, while the 2018 bear market lasted just 364 days.
With this in mind, it is reasonable to assume that the duration before the market bottom will be shorter this time, but it also shows that the market is likely not there yet.
To reach such numbers, the market would need to reach December, which is likely when Bitcoin bottoms. If history were to repeat itself, an extended period of unusually low volatility would ensue, providing investors with the best opportunity to buy coins.
Another thing is the performance of on-chain indicators as they are generally low when Bitcoin bottoms. As reported by Bitcoinist, these on-chain metrics hit a long-term bottom of, which could help indicate a bottom, or at least a bottom approach. The same thing happened during previous bear markets and the current levels are consistent with the same levels.
Bitcoin’s low volatility also indicates this. For example, in 2014 the low volatility span lasted 280 days, while in 2018 the span lasted 130 days. It also follows the trend of a decrease in the number of days it takes to bottom out. BTC’s current low volatility has lasted for around 121 days.
Well, these metrics are not an exact science as they are not the only factors that determine when a bear market ends and a bull market begins. The most important thing is perhaps the most unpredictable, namely human sensitivity. In the end, the bitcoin price will react to the balance of supply and demand in the market.