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Bitcoin, the largest cryptocurrency in the world, continued its advance in early December. Since the start of the month, it is already up more than 10%, and up 150% since the start of 2023.
The rally has been impressive, yet it may just be getting started according to Trading.biz analyst Cory Mitchell.
Mitchell said, “Bitcoin has entered the acceleration phase of its cycle. This is when there’s potential for large moves in a short amount of time as enthusiasm builds. 2013, 2017, and 2020 saw rallies of over 400% in under a year.”
Mitchell also points out that the current chart resembles the bottoming patterns of 2020 and 2015, both which saw substantial rallies.
Mitchell added, “In 2020 when Bitcoin broke out of a sideways range after bottoming, it ran near 400% into the ultimate 2021 high. Off the 2015 bottom, a range breakout occurred in 2016, and the price ultimately rallied more than 3,800% into the 2017 high.
“Currently, Bitcoin has only rallied 30% above its earlier 2023 range. A potentially long way to go even to match 2020/2021.”
There are no guarantees that history will repeat, but large bottoming patterns have produced big gains in Bitcoin before.
Late 2021 to late 2022 saw the price of Bitcoin decline 78% off the $69,000 high. Six declines of greater than 70% have occurred in the last decade. The price performance following these declines has been impressive.
- 2022 bottom: +168% so far
- 2020 bottom: +1,585% (to April 2021 high, as a 56% decline followed before it reached the all-time high later that year)
- 2018 bottom: +355%
- 2015 bottom: +12,804%
- 2014 bottom: +102%
- 2013 bottom: +2,484%
The percentage increases are the distance from the low to the high before another 70% or greater decline commenced (except as noted in 2021).
The current rally (168% off the 2022 low) has already eclipsed the 2014 rally. The next smallest rally was 355% off the 2018 bottom. A rally of approximately that magnitude off the 2022 low puts the price back near the $69,000 all-time high.
With how quickly these rallies can progress, that could happen by early to mid-2024.
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While the rallies following the patterns and declines resembling Bitcoin’s current situation are impressive, it’s important to note that price doesn’t move in straight lines.
Prior triple and quadruple-digit gains in Bitcoin have experienced pullbacks of 20%, 30%, and even 50% before continuing higher. These smaller declines are much more common than 70% declines which often mark important bottoms.
So far in this 168% rally, there have been three pullbacks greater than 20%. There will be plenty more if the price continues to rally toward all-time highs and potentially beyond.
Bitcoin traders and investors must take the data and decide how they will trade. Large moves are possible in both directions, so risk should be managed with position size and planned exits to limit losses if the price doesn’t move as expected.
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