Posts

Bear market and recession – Is it good time to buy Bitcoin?

avatar of @celestal
25
@celestal
·
0 views
·
3 min read

So, markets have been down the drain, and the magnitude of it certainly surprised me as I admittedly anticipated a lengthening cycle to occur where the market top would be reached later this year or some time in 2023. Luckily though I had some wisdom in me that I had built a small hedge of $1.5k in stables for a potential downside, not in UST though, that whole thing turned out really bad. Genuinely sorry for everyone who had invested in LUNA. I don't get why people take satisfaction for luna investors' loss, because that fiasco affected the whole crypto market.

Anyway, we have to admit that the bear has come, so now the question is

Where's the bottom?

The only answer I can give is that I can't know for sure. However, a better answer to question is

When to buy?

One indicator I've been using to get an idea where we are with Bitcoin is relative strength index on a weekly chart. When the RSI indicator is above 70 it means that Bitcoin is overbought. When it's below 30 or low 30s it's oversold. Historically, below 30 or low 30s has indicated the bottom price of Bitcoin.

Right now on weekly chart the RSI is about 33, similarly to the corona dip in 2020 May which was the best buying opportunity in the last 2 years. There still could be ways to go down from here though, because we could go below 30 before the bottom's in. That's why it's better to dollar-cost-average in to the market than guess the bottom, because there's always the possibility of going lower.

Speculation time

Right off the bat, the last time I speculated I was wrong with the lengthening cycles, so I might be wrong with this one, too. That being said, let's look at the previous retractions.

Historically the full retraction has been 80%+, though each cycle, the retraction has been slightly less, because volatility decreases as Bitcoin keeps growing. So, counting the brief dip to $25k, that was already a 60% decrease from the May top. The worst case scenario I see is that we make that 80% correction which would put the bottom around $14k. However, we never had that blow off top, so maybe the retraction won't be as big as last time. That would also break the historical trend of a next cycle's bottom holding above previous cycle's top.

What about altcoins though?

In a typical bear market Bitcoin has increased in dominance and alts have been bleeding against it. We haven't seen a drastic move in that quite yeat, however the alt coin dominance (100-Bitcoin Dominance) has broken the uptrend line which is now becoming a resistance line, which to be honest, doesn't seem good on alts, and good be a sign that there's whole lot more bleeding to come.

Ethereum

Ethereum is still kinda holding against Bitcoin. It seems to have break back into that long-term upward channel from above. Remains to be seen how Ethereum will continue to perform during this bear market.

Hive

Seems like Hive is trying to keep above that long term upward support. I'm not optimistic it'll hold for long though should the bear market continue.

The macro environment

Looking at S&P 500, you can see that from the corona dip, the market spiked over 100% which seems like an exaggeration caused by inflation and stimulus. The music can't go on forever and it seems like we're now long due for a correction, potentially a recession like in 2000 and 2008.

Bitcoin in recession

Should the general market enter into a recession, it'll be new territory for Bitcoin, because Bitcoin has only existed during the general bullrun that has lasted from 2009 to this day. Speculating on this, we could take a look at the second hardest money after Bitcoin, gold, and see its past performance during high inflation.

High dollar inflation isn't exactly a new phenomena, but was in its height in the 70s and early 80s.

As we can see, gold actually had a major 2000% rally during that time. Remains to be seen if Bitcoin will behave similarly in high inflation environment, and if gold will emulate it's history.

Last Words

Hopefully you have a cash position to average into the market should the bear market get ugly. I didn't build as big of a stable coin hedge as I would've hoped, but that was of my own greed, because I didn't prepare enough against my own thesis. I did better than last time though in 2017/2018 when I sold none and had no hedge. Be patient and don't panic.