- Bitcoin’s recent price action has led to suggestions that it is in a bear market
- The drop below $30,000 is reminiscent of the 2018 collapse from $6,000
- A weekly close below $30,000 and the future looks bleak indeed
Bitcoin dropped to $27,000 overnight, which has led to many suggesting that a full on bear market is in progress. Bitcoin dropping below $30,000 is without doubt the catalyst for a potential bear market, but it is what happens next that will dictate whether we are in a bear market or not.
The bullish scenario for Bitcoin is that it reclaims $30,000 and uses it as support:
This eventuality would show that the current price action is just a temporary flush before continuation of the previous trend, with a period of consolidation to follow before further upside. The further price goes down however, the less likely it is to rebound all the way back up past $30,000 again.
If this is just a temporary flush, the buy volume needs to outweigh recent sell volume, or at least be approaching it, and we simply haven’t seen this.
In this scenario, Bitcoin attempts to reclaim $30,000 but fails, leading to a rejection and a collapse. We might expect a temporary bounce at $24,000, but if the trend is strong enough this will just be temporary before $20,000 is hit. The final flush could be driven by liquidations, which may even temporarily take Bitcoin into the high teens.
Bitcoin has never in its history retreated to prior highs after clearing them, so such an eventuality would be an unwelcome first, but suddenly it is very much on the table. Such price action would also keep up Bitcoin’s amazing record of suffering a halfway halving collapse, which it has done on each occasion in the past.
Bitcoin Bear Market is Looking More Likely Than Reversal
Obviously, scenario 2 is the scenario that has the potential to usher in a bear market, with the LUNA/UST debacle and the general sentiment around risk-on assets helping to trigger such downward movement.
The weekly close is all-important as this will give us a guide for the medium term, but what we’ve seen so far leaves Bitcoin holders far from confident that the good times are about to roll again.