- Bitcoin is entering a discount zone not seen since March 2020
- The reaction to the recent dip suggests that a 2019-style recovery may be playing out
- Historically speaking, this zone has been a great time to buy
Bitcoin has entered a discount zone last seen during the March 2020 crash, suggesting that the time to come off the sidelines could be nigh. Only four times in its history has Bitcoin fallen below the ‘Bitcoin Investor Tool: 2-Year MA Multiplier’ line, with each occasion essentially encapsulating a bear market or crash bottom, signalling that Bitcoin is currently in a historically prime buying zone. However, with market conditions markedly different than in the past, can this still be relied upon?
Bitcoin Officially is in ‘Buy the Dip’ Territory
The Bitcoin Investor Tool: 2-Year MA Multiplier uses two different moving averages and the Bitcoin price to show when Bitcoin is, essentially, oversold:
As we can see, the Terra-induced dip has taken Bitcoin beneath a level last seen during the March 2020 crash, and before this the 50% drop in December 2018. In hindsight, these were both prime Bitcoin buying opportunities, but of course only time will tell if this is the same this time round.
We can already see that the very different market conditions are having an impact on Bitcoin’s activity post-drop. In March 2020 we saw a V-shape recovery before storming onto all time highs, but back then money was easy to come by and risk-on assets were the play.
Two years later and things are the exact opposite, with money becoming tighter and attention turning back to the safe haven of cash as a potential recession looms. This suggests that something like the 2018/19 bear market will play out – weeks or months of stagnation at the lows before a slow grind back up towards the end of the year.
How Low Can You Go?
Of course, no one is suggesting that Bitcoin doesn’t have further to fall. If we are entering a 2015 or 2019-style scenario, we could have seen just the beginning of the dip, although $30,000 does seem to be holding firm as support…for now.
History has shown us that buying bitcoin when it’s in this zone is always a beneficial play, but, apart from when it first launched in obscurity, Bitcoin has never traded in these macro circumstances, so will it be different this time?
Only time will tell.