Nov 22, 2021
We’re experiencing an atypical Bitcoin bull run
Since 2011, Bitcoin bulls and bears cycles have been following a very standard pattern as follows:
- It’s easy to distinguish between bulls and bears. Each run lasted for a long time and Bitcoin price just kept rising or decreasing(there were 40% short-term decline during the bull run).
- Every four years a great cycle will take place, corresponding to the Bitcoin Halving cycle, especially in 2017, the bull trend perfectly resembled that of the bull run in the second half of 2013, allowing a large number of investors to become super rich. That constitutes the fundamental basis of Moving Average 120/ 200 day bear/ bull division line theory.
The current atypical bull run
This bull run is a little atypical than previous ones. Although a Bitcoin halving is always followed by a raging bull run, we saw some differences:
a. According to the four-year cycle theory, the bull run in 2018 behaved exactly like that in 2014. It’s a perfect replication of 2014 since the time span between the lowest point and the halving day is similar(542 days in 2018 versus 507 days in 2014). That is to say, the market in 2019 should be similar to that in 2015 when the price of Bitcoin went sideways. But in fact, a small bull run comes out from April to June(BTC rose from $4133 to $13880, about a 3.4 times).
b. On 12th March, 2020, the unprecedented Bitcoin crash occurred. The price fell from $10500 on 13th February to $3850 on 13th March, a 63% drop within one month! BTC price dropped below the MA 120-day and 200-day line, and even dropped by 52% within 24 hours(from $7970 to $3850) . According to the historical pattern, the bear run was considered to begin once the price dropped by 63%. However, such scenario didn’t happen. Bitcoin has risen back up to $10074 on May 7th, 2021, just two months later .
c. This 2021 bull run started after the halving, we expect to see many brutal sell-offs, decline by 40%+, according to the pattern we found in 2013 and 2017, but in reality, there were only several major corrections of 20% and the largest one reached only 30%.
d. After the price of Bitcoin shot up to $65,000 from $10,000 without any correction, a combination of leverage liquidation on May 19 and crack down by Chinese regulation on May 21, caused a 54% drop of BTC, from $64843 to $30,066, equivalent to the price drop pushed by the policy regulation on September 4, 2017 and the serial high leverage liquidation on March 12, 2020.
The reasons of this atypical bull run can be explained as:
- The small bull run in 2019 might be caused by Plustoken case;
- The brutal sell-off on March 12, 2020 might be triggered by excessive financial derivatives;
- The large buy-in by institutional investors like Greyscale and Tesla has led to no correction between $10,000 and $65,000.
Anyway, so many strange features indicate that we are now experiencing an atypical bull run and boundaries are blurred between bulls and bears(Does the bull run still exist after BTC dropped by 63% on March 12, 2020?).
Can we still take the previous pattern for reference?
Given that there’s no more exact replication of experience, what else is eternal? Only mathematical laws. It requires few hypothesis, for example, the 60-day accumulated increasing rate.
We believe that BTC bull run resulted from large amounts of new investors and new capital-inflow. This assumption is still valid in this bull run as both institutional funds and plenty of retail investors in animal coins acted almost the same as the last bull run.
In the final phase of the bull run, investors became europhia. They run out of funds and leverage, leading to the boom of Bitcoin in a very short time. However, the speed of new investors and their funds fail to keep up with the rapid change of price. Then Bitcoin dropped from a very high top without any support, and finally, the bull market came to an end.
The 60-day Accumulated Increasing Rate Metric
The process can be described as an exorbitant 60-day accumulated increasing rate in mathematical terms. This metric equals the accumulation of daily change(positf and negatif) over the past 60 days.
When back-testing the historical data, the indicator shows great consistency:
A. The market mania position= the global top of Bitcoin price= the highest value of 60-day Accumulated Increasing Rate(without exception)
B. The top K-line isn’t flat but sharp, for the market europhia lies in one time point instead of one time period.
But the local high $64895 on April 13 didn’t fit this rule, separated by 51 days between the top value of the 60-day accumulative increasing rate and the BTC ATH. The K-line showed an unprecedented rounded top, not a sharp one.
Thus, many veterans in cryptocurrency market believe that the bull run hasn’t been over yet: How can the bull market end before the mania shows up?
Maths law is more reliable
The mathematical rule is more reliable and unbreakable than historical experience, in other words, we are still in a long bull run, probably in the crash of March 12 (3 months after which, Bitcoin broke the ATH ). The worst scenario would be a short bear run among double top bull market like that in 2013(7 months later, BTC broke the ATH in November, 2021). The long-term bear run is less likely to happen.
Why? There was no drastic europhia investors to exhaust funds to beat long-position holders, so we will not face a long bear run.
$30K might be the lowest price of Bitcoin if the crackdown against cryptocurrency trading and mining in China turns out less strict like before(similar to the crash on March 12 — the serial liquidation the price fell below the historical lowest price and there is a long-time support in the $30,000 area before Chinese New Year). If the crack down is more severe, the price might went to $25,000 (63% decline according to the rule of March 12 Event).
Although it’s hard to predict the price of Bitcoin in a short term, the bull run is still in play.
