Bitcoin Resembles 2022 Patterns: Can BTC Weather the $68,000 Mark?

Bitcoin Resembles 2022 Patterns: Can BTC Weather the $68,000 Mark?

Summary:
Bitcoin's current on-chain dynamics are reminiscent of its behavior in early 2022, sparking concerns about a potential bear market if crucial price levels are breached. Recent indicators suggest a target price of $68,100 for Bitcoin.

Key Takeaways:

Bitcoin's current on-chain metrics echo trends from early 2022, increasing the possibility of a major bear market if key thresholds are not maintained.
Recent technical analysis outlines a bear flag targeting a BTC price of $68,100.

Bitcoin On-Chain Data Signals Early Bear Market

Recent analysis demonstrates that Bitcoin has retraced to its True Market Mean, which is presently set at $81,500, according to data from on-chain analytics provider Glassnode.

The True Market Mean, also known as the Active-Investor Price, represents the average cost for all active coins in circulation, excluding those held by miners.

Related: A technical strategy anticipates a 50% rebound in MSTR stock.

“This level typically delineates the boundary between a mild bearish trend and an intense bear market,” Glassnode clarified in their latest on-chain report.

Bitcoin: True Market Mean. Source: Glassnode

The accompanying chart indicates that the BTC/USD trading pair was above this mean between January 22 and May 5, 2022. Following a dip below this threshold on May 6, Bitcoin experienced a severe drop of 61%, bottoming out at $15,500 in November of that year.

This pattern is confirmed by a Supply Quantiles Cost Basis model that monitors the purchase prices of the largest Bitcoin clusters. Since mid-November, Bitcoin's price has receded below the 0.75 quantile, now standing around $96,100, resulting in over 25% of the supply being "underwater."

Glassnode observed that this situation has led to a precarious balance, where there exists a risk of top buyers capitulating while the potential for sellers to tire and form a bottom remains uncertain.

Bitcoin: Supply quantiles cost basis. Source: Glassnode

CryptoQuant’s Bull Score Index provides a detailed outlook, having fallen sharply since August and plummeting below 40 in October. Although the index has remained steady in November despite volatility in short-term prices, the latest reading remains in the 0-20 range, indicating strong bearish conditions akin to those in January 2022.

Bitcoin: Bull Score Index. Source: CryptoQuant

As noted by Cointelegraph, Bitcoin's current price trajectory shares striking similarities with the bearish market period of 2022.

Bear Flag Patterns Predict $69,000 for Bitcoin

Recent attempts at recovery for Bitcoin were met with significant resistance around the $93,000 mark, as highlighted by data from Cointelegraph Markets Pro and TradingView.

This resistance aligns with the yearly opening price and represents the upper boundary of a bear flag shown in the two-day chart below.

A decisive break and close below the bear flag's lower boundary at $91,000 would confirm this bearish formation, potentially leading to a downward trend with a target price of $68,150—matching previous all-time highs from 2021. Such a shift could result in total losses of up to 27%.

BTC/USD two-day chart. Source: Cointelegraph/TradingView

Momentum indicators, including the Relative Strength Index (RSI), are currently sluggish at 40. This signals that market conditions continue to favor a downward trend.

As reported by Cointelegraph, this bearish formation can be invalidated if bulls manage to push the price above $96,000, supported by an uptick in the Coinbase Premium.