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Summary of the thesis
Bitcoin (BTC-USD) started 2022 around $44,000 with most analysts believing that the mythical $100,000 would be broken in the following months. Instead, Bitcoin sits at just under $17,000 today in the midst of a historically deep bear market.
2023 promises to be a challenging year for Bitcoin as the world’s leading cryptocurrency stares at not one, but two “death crosses.”
Bitcoin is in for a bumpy start to the year, but I believe Bitcoin could find an all-time low in the next few months and begin its next bull phase. With that in mind, I would expect a lot of sideways action before a real crypto rally begins in earnest.
Weekly Death Cross
Moving averages are commonly used indicators in technical analysis. When the 50-day moving average crosses below the 200-day moving average, this is called the death cross and is considered a bearish indicator.
For the first time in Bitcoin’s history, it looks like the 50-day moving average on the weekly chart may break below the 200-day moving average.
Bitcoin Weekly Chart (TradingView)
This could happen in the next few weeks if Bitcoin’s price stays at this level or lower. Furthermore, the weekly chart’s RSI is heavily oversold and the MACD also seems poised for us to see a bearish crossover.
This is all in line with the expectations I outlined earlier that Bitcoin should find a final bottom around $14,000
Hash ribbon crossover
Bitcoin is on the verge of a historic and never-before-seen bearish crossover, and a few weeks ago the cryptocurrency also saw a bearish crossover in the Bitcoin Hash Ribbons.
Bitcoin Hash Bands (TradingView)
The bitcoin hash bands are used to measure the strength in the bitcoin mining market, but they can also tell us a lot about the bitcoin price. The Hash Band indicator consists of a 30-day moving average and a 60-day moving average of the hash rate.
When the 30-day moving average breaks below the 60-day moving average, it usually indicates miner capitulation, while a break of the 30-day moving average above the 60-day moving average is seen as a positive signal .
In August we had a bullish crossover, but last month we again saw the 30-day moving average fall below the 60-day moving average. Miner capitulation could lead to increased selling pressure for Bitcoin, which could accelerate the current sell-off.
What’s coming up in 2023?
Despite Bitcoin’s current bearish outlook, I’m still bullish on Bitcoin in 2023. Bitcoin should find a bottom in the first half of the year. That doesn’t mean we’re going to launch to new highs right away, though. What is more likely is that we will see some “sideways movement” in the second half of the year like we saw in the previous Bitcoin cycle.
Bitcoin price chart (TradingView)
Let’s take a walk into the past. Back in 2017-2018, Bitcoin was at the peak of a bullish rally that saw Bitcoin’s price approach the $20,000 mark. However, over the next 12 months, the price of Bitcoin began to decline, causing the cryptocurrency to lose over 80% of its value.
In December 2018, Bitcoin bottomed just above $3000. Over the next few months, Bitcoin’s price more than quadrupled, only to be followed by a sell-off that would see Bitcoin retest December’s lows.
Bitcoin declined nearly 88.7% before hitting a solid bottom, after which we witnessed a fast and furious rally that propelled Bitcoin to new all-time highs in 2021.
This type of price action is typical of the Bitcoin cycle and an Elliott Wave impulse where wave 1 is followed by wave 2 that can retrace a significant amount. Only after this 1-2 setup are we ready to move convincingly to new highs in a wave 3.
I expect Bitcoin to follow a similar pattern after finding a bottom in the first half of the year.
Bring away
In summary, Bitcoin’s launch into 2023 should be a mirror image of its 2022 launch. As everyone was looking for a rally to new all-time highs, we saw a massive sell-off. Now that everyone is expecting Bitcoin to crash and burn, I believe the cryptocurrency will give us a significant rally once it finds a bottom in the next few months. This rally could present us with a significant investment opportunity as Bitcoin’s price could easily double or triple in a matter of months. However, I would expect bitcoin to give us one last opportunity after that to get into a market entry that could see us near all-time lows later in the year or even into 2024.
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