Beware the Bear Market Rally

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  • Lots of people are getting excited over the recent Bitcoin move back towards $21,000
  • After such a period of stagnation, any upward momentum is welcomed
  • However, until proved otherwise, this is nothing but a bear market rally

We get it, Bitcoin has broken a downtrend almost a year in length, there’s some green on the board and crypto Twitter is finally no longer full of messages to ‘go outside’ and pictures of inside a gym. A word of warning though – don’t get fooled into thinking that the bear market is over. Far from it. Massive price increases are typical of a bear market, but they are designed to hook you in and get you thinking that the tide has turned, but the reality is often very different.

Green Shoots are Synthetic Grass

Ever since Bitcoin dropped to sub $20,000 in June, price has been largely stagnating. The rebound to the $25,000 area was rejected, and since then it’s been boring, boring, boring. So it’s not surprising that everyone is super excited by the move back above $20,000 again. The way things are going there’s no reason why a push to $22,500 or even all the way back to $25,000 isn’t out of the question…but hold your horses, cowboy. This ain’t no bull market yet.

To illustrate what we mean, let’s take a look at the last bear market:

bitcoin 1

Bitcoin topped out in December 2017, and 11 months later it embarked on a two-year fluctuation period before it finally broke out for good. This included wild oscillations between $3,500 and $12,500, representing a 257% bear market rally followed by a 72% correction.

Let’s compare this same timeframe to today:

bitcoin 2

11 months after the market top, here’s where we are – and how far we have to go, relative to the prior bear market. Now of course there’s no saying that this bear market will be the same as the last one in length, but this should give an example of just how early into it we really are – and there was no global financial crisis in 2018.

As we’ve already explored, there won’t be another bull market until people have the money to spend on one, which won’t be until inflation has been tamed and costs are brought down to reasonable levels.

Don’t Get Sucked In

If the last bear market gave us a 257% Bitcoin rally, there’s no reason why we can’t expect something similar here. A run to $30,000 isn’t unfeasible to really get people’s hopes up that the good times are back, but Bitcoin bear markets are simply not that short.

Conditions both within Bitcoin and outside it in the wider world are simply not precipitous to a full on bull run, so don’t get swept up into the emotion of thinking that the good times are about to roll after just 11 months.