The last time the world’s number one cryptocurrency was quiet, prices crashed

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Bitcoin is currently hiding within a rare volatility stress area, one that is likely to herald the long-awaited cyclical bottom for the world’s number one cryptocurrency. However, before Bitcoin can resume its substantial upward trend, as dictated by the ever-decreasing supply dynamics of the cryptocurrency, more pain awaits bullish investors.

Bitcoin Historical Volatility Index (Daily)

As evidenced by BitMEX’s Daily Historical Bitcoin Volatility Index (daily time frame) above, the cryptocurrency has only been this quiet two more times this year, with both instances resulting in additional losses. To wit, the first such instance occurred in October, before FTX’s spectacular crash, which unleashed a new round of contagion across the crypto space. The second case occurred earlier in December, which resulted in smaller losses for Bitcoin bulls.

Bitcoin Historical Volatility Index (Weekly)

Looking at the weekly time frame, note that the last time Bitcoin was this quiet was back in March 2019. However, at that time, Bitcoin was just beginning to embark on a historic bullish trend. Obviously, the current volatility squeeze system has historically proven to be an important fulcrum for the number one cryptocurrency in the world. In light of the large amount of evidence, we believe that the next phase of Bitcoin is likely to be lower.

Bitcoin is currently down about 57 percent compared to the last death cross that occurred in January 2022. As a refresher, the death cross occurs when the 50-day moving average drops below the 200-day moving average. In the past, Bitcoin has recorded losses of 42%, 55%, 65%, 71% after the death cross. Since Bitcoin usually records an average bear market loss of 84.5 percent Relative to the previous all-time highs – the level that corresponds to the price around $11,000 – the probability favors deeper losses in the future.

Moreover, bitcoin has now collapsed from an important RSI support area, which strengthens the hypothesis of larger losses in the future.

According to Scheduling Rekt Capital, Bitcoin dropped about 547 days in 2015 before the cryptocurrency’s second halving event. In 2018, the price of the world’s number one cryptocurrency fell to a 486-day low before the third halving event. Note the trend here: each successive bottom occurs approximately 60 days earlier than the previous one. If the same analog is correct this time, Bitcoin should hit 425 days before the fourth halving event, currently scheduled for April 2023. This means that the cyclical rock bottom for cryptocurrency should happen sometime in February 2023.

Of course, the first half of 2023 is already being seen as a challenging period for the risky asset world, given the prospects of a broad economic slowdown in the US or even an outright recession. However, China’s post-COVID reopening offers a glimmer of hope for bitcoin, oil and other global commodities, especially when combined with expectations of a real hit of economic stimulus from the Asian giant.

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Do you think that more losses await the world’s largest cryptocurrency by market capitalization? Let us know your thoughts in the comments section below.

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