Think You’ve Missed the Bottom? Give it Time

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  • Many people obsess about buying the bottom when prices fall
  • Bitcoin bear markets give plenty of opportunities to buy at low prices
  • What looks like the bottom may actually not be the bottom at all

Buying the bottom is something that many of us will obsess over, especially during capitulative events. This is understandable given the gains that can be on offer for those that do, but this is something that is normally down to luck as much as judgement. In a bear market however, history has shown us that there is plenty of time to catch the bottom, years in fact, and that when you think you have bought the bottom of a bear market, you probably haven’t.

When a Bottom Isn’t a Bottom

Looking at the 2018/19 bear market, throughout the whole of the first year Bitcoin did the typical ‘bouncing ball’ pattern, where price found a baseline and experienced lower and lower bounces while the world completely forgot about it:

bitcoin 1

This price action gave everybody almost a full year to buy what looked to all intents and purposes like the bottom, with anyone who hadn’t bought back in yet looking like they were going to get left behind. And then this happened:

bitcoin 2

Suddenly, those who hadn’t bought in yet had a chance to buy at a 50% discount. Even if they didn’t buy the exact bottom of $3,150 the first time, they had a chance to buy at $3,350 nearly two months later as the pump yet again fell away.

This dump precipitated the Xi Jinping-inspired pump to $14,000 but this couldn’t be sustained, with price collapsing again…almost right back to the 2018 baseline:

bitcoin 3

This meant that those who neglected to buy back in during the whole of 2018 and 2019 still had the chance to pick up some bitcoin at the 2018 baseline two years after the bull run topped out.

What About Today?

If we were to extrapolate this to the current situation, we can envisage $20,000 acting as the equivalent of the $6,000 baseline, with resistances at $24,000 and $30,000 playing a part in rejecting bounces:

bitcoin 4

As many will know by now, the halving event is a natural precursor to a market recovery, and with the next one occurring in April 2024 we can expect the market to bottom out, either in a capitulative wick or in a slow grind, by the end of 2023. Of course, history tells us that we can’t rule out a flash crash to the $10,000 region, which would present the opportunity of a lifetime.

What this means is that if this truly is a bear market, and it very much seems like it is, there will be many chances to buy at low prices, even if you don’t catch the bottom. And if you do think you’ve caught the bottom, the chances are that you haven’t anyway.