Bitcoin (BTC): Learning from the 2011 and 2014 Bottoms

January 16, 2019 / by Bill Noble

The crypto Twitterverse is looking at how yesterday’s Bitcoin (BTC) decline brought Bitcoin to 80 percent below its all-time high. While the 80 percent number is a nice point of trivia, we believe we have better numbers to help find a tradeable bottom in Bitcoin (BTC).  

Since the start of the avalanche lower in Bitcoin (BTC) in November, we studied the major bottoms in 2011 and 2014. In these cases, we looked at where the final low was relative to Bitcoin’s (BTC) 200-day moving average.

For example, in 2011 Bitcoin (BTC) bottomed 76 percent below its 200-day moving average. 76 percent is a common number used in Fibonacci analysis (Figure 1).

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In 2014, we noticed Bitcoin (BTC) bottomed 62 percent below its 200-day moving average (Figure 2). 62 percent is another important Fibonacci number, and it is the number most frequently looked at after 76 percent. FYI, we noticed that, in 2014, there was a brutal retest of the initial low.

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In the 2018 example, Bitcoin (BTC) hit a bottom in December near $3,200. That level was 50 percent below its 200-day moving average (Figure 3). This is interesting because 50 percent is the Fibonacci level that frequently follows 62 percent. So, there seems to be a sequence where Bitcoin (BTC) may make major bottoms at distances from its 200-day moving average that follow in sequence: 75 percent -> 62 percent ->50 percent.

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To us, this represents a very interesting pattern. If the pattern holds, it lends itself to the theory that a selling climax has already happened in Bitcoin (BTC), and an accumulation phase has begun.

The alternative scenario may have two components. First, Bitcoin (BTC) may eventually move to 62 percent below its 200-day moving average. That would put the downside price target for Bitcoin at $2,200. Such a move could occur as a result of ongoing problems with the Ethereum hard fork. Second, there is the theoretical chance that Bitcoin (BTC) may complete the Fibonacci series by flash crashing to 100 percent below its 200-day moving average. 100 percent is frequently the number looked at after 76 percent. That would put the Bitcoin (BTC) target at roughly $8.

Bottom Line: Anything is possible in Bitcoin (BTC). If you are super bearish about Bitcoin (BTC), be careful what you wish for. For the moment, it seems more likely that the low near $3,200 may get retested and possibly hold up. If not, $2,200 is next.

Join me as I work with the Crypto.IQ Trading Desk to plot the exact course to either trade the quiet consolidation or another climactic down move.