Bitcoin Price Analysis: Is History Repeating Itself in 2023?

Bitcoin’s price rally in 2023 seems to bear a striking resemblance to the bear market experienced in 2018. In both cycles, the price of Bitcoin experienced a significant drawdown, and the recovery trends were almost identical. In this article, we will explore the similarities between these two periods and what they could mean for Bitcoin’s future.

Bitcoin’s 2018 Bear Market

In 2018, Bitcoin’s price dropped from just under $20,000 to less than $3,200, resulting in an 84% drawdown. The market recovered, but it took over 370 days for the price to bounce back. The recovery was a slow climb, but eventually, the market rallied, and Bitcoin regained some of its lost value.

Bitcoin’s 2022-2023 Bear Market

Fast forward to 2023, and we are experiencing another bear market. BTC dropped below $16,000 from more than $69,000, resulting in a 78% collapse. According to K33, a research unit, this cycle’s duration is similar to the 2018 bear market. The recovery trends are also almost identical, with a 60% return in 510 days.

K33 also noted that the resemblance between the two drawdowns is staggering. If the 2018 bear market ended after 556 days from the 2017 peak with a 34% decline, K33 believes Bitcoin could muster a rally to $45,000 by May 20 — a 50% jump from the current price. However, this is not a guarantee, and past performance is not always an indication of future results.

The Psychology of Bitcoin Holders

K33 suggests that the similarity between the two bear markets could be attributed to the psychology of the typical BTC holder. Committed long-term holders are still unwilling to sell at a 60% drawdown from the previous peak and use these periods as accumulation periods. These holders believe that Bitcoin’s price will eventually recover, and they want to buy more while it’s cheap.

Increased Utility and Banking Crisis

Recent crypto performance can still be attributed to two factors: the banking crisis and increased utility. Dan Weiskopf and Mike Venuto, co-portfolio managers of Amplify’s blockchain-focused ETF BLOK, said in a recent report that the advent of Bitcoin inscriptions (Ordinals) may inject a further $5 billion in incremental value into the ecosystem, providing increased revenue to miners over the long term.

Our current macro environment also appears consistent with past rally patterns and fundamentals, per Weiskopf and Venuto. Bitcoin has the ability to rally during economic crises, they said, pointing to the Cypriot financial crisis in Greece in 2013, Brexit in 2016, and more recently, the economic turbulence resulting from the pandemic in 2020-2021.

Conclusion

The similarities between the 2018 bear market and the current bear market are hard to ignore. However, we must remember that past performance is not always indicative of future results. The psychology of BTC holders, increased utility, and banking crises are all factors that could influence Bitcoin’s future. As we move forward, it will be interesting to see how Bitcoin’s price responds and whether history is truly repeating itself.

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