The cryptocurrency market recorded one of its best starts to the year in 14 years with a rise of 28% for the price of Bitcoin and 31% for Ether (ETH). This bullish first part of January fuels the debate on the end or not of the bear market in place since November 2021. Here are two charts you absolutely need to know to participate in the argument of this debate.
The relative strength between Bitcoin and the Wall Street stock market
It’s an almost unexpected start to the year for the cryptocurrency market as long as it was prisoner of the consequences of the FTX affair in terms of confidence. As the equity market rebounded strongly from last October and the US dollar fell more than 11%, the total crypto market capitalization sank amid capital outflows from centralized platforms.
The strongly bullish start of the year for cryptos (+28% for the bitcoin price and +31% for the ETH/USD rate) therefore makes it possible to catch up on other risky assets on the stock market and to erase the bearish effects of the fall at the beginning of last November.
But is it enough to argue for the end of the bear market in place since November 2021? Note that for some, the bear market started in the spring of 2021 with the first upward reversals in interest rates on the credit market.
The market’s rise from $16,000 to $21,000 indeed made it possible to record the first breach of resistance in more than 15 months, accompanied by a bullish return of the various measures of volume, commitment and participation (like the rebound from assets under management of the world’s first crypto ETF, the BITO).
This is certainly not a new bull run, due to the very high fundamental uncertaintybut on the other hand it seems fair to me to say that the bear market has neutralized itself. The challenge now is to remove that the $19,000 / $20,000 price zone has indeed recovered its support status, because breaking this zone again would be proof that the market would have only experienced a dead cat bounce.
On the side of the arguments in favor of the end of the bear market, there are many bullish divergences active in weekly data, like that on the Bitcoin/S&P500 ratio.
Chart that reveals the relative strength ratio between the US stock market and the price of bitcoin (the US stock market being represented by the S&P 500 stock market index)
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Bitcoin’s drawdown percentage curve against its ex-ATH
Pay homage to the “price/momentum” type technical methodology, car there were numerous bullish technical divergences between the price action and its first derivative for the past few weeks. If you watch my videos every Tuesday, I use the RSI technical indicator to represent the momentum of the market, i.e. its underlying speed. These bullish divergences have therefore produced their technical rebound effect, I present a very relevant one on the chart below.
The latter exposes the weekly curve (the points are updated every weekend, this graph therefore has a medium/long term range) of the percentage drop in the price of bitcoin since its old historical high (ATH for All Time High) . On this curve, you can observe the presence of a superb bullish divergence with the RSI technical indicator, here too, it has perfectly produced its bullish effect with the 28% rebound of BTC.
In order to give more validity to these discrepancies, we should now see the BTC breaking through the resistance at $21,500i.e. the price level before the fall of the FTX affair.
Graph showing the curve of the Bitcoin price drawdown percentage since its old all-time high
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