How Can Bitcoin Avoid a Year-Long Bear Market? Trader Conviction Isn’t the Answer

Summary: In this article, we analyze Bitcoin's current market position and the critical factors affecting its potential recovery. With an elevated long/short ratio and important price action trends, we delve into what could trigger a possible reversal and prevent a prolonged bear market.

Key Takeaways

Bitcoin's long/short ratio indicates heightened interest from traders, yet profits are lacking.
A significant trigger for a trend reversal would be the Bitcoin supply in profit, which has seen a marked decrease since October.
Historical analysis of Bitcoin's price actions reveals similarities in current behavior, suggesting potential challenges ahead.
Maintaining price levels above $75k-$80k in January is crucial to support bullish projections.

How can Bitcoin avoid a year-long bear market? Trader conviction isn't the answer

Analyzing the Current Bitcoin Market

Bitcoin [BTC] has again shown an increasing long/short ratio, as observed by analytics platform Alphractal on social media. This trend suggests that traders are eager to buy into Bitcoin, reflecting heightened interest.

However, despite this activity, we have not seen corresponding profits from trading. The long/short ratio has remained elevated for several months, and when it surpasses that of altcoins, it typically signals a strong buying opportunity. Unfortunately, this pattern has faltered lately, impacting traders' recovery efforts.

Joao Wedson, the founder and CEO of Alphractal, warns that reliance on leveraged trading may be obstructing positive recovery movements in the market.

Will Bitcoin Experience a Recovery or Enter a Bear Market?

Axel Adler Jr has shared potential triggers for a change in Bitcoin's trend. The first indicator is the Bitcoin supply in profit, which reached a high of 19 million BTC in October and has now dropped to less than 13.5 million BTC. Notably, the 30-day Simple Moving Average (SMA) and the 90-day SMA of the supply in profit differ by 1.75 million BTC, reminiscent of the situation in 2022, which led to an extended bear phase.

To avert a similar downturn, it is crucial for Bitcoin bulls to maintain prices within the current range, ensuring supply in profit stays above the 30-Day SMA. Analysts note that the 1.75 million BTC gap is reducing at a rate of 28,000 BTC daily. If this trend continues, there are projections for a bullish crossover in late February to early March. However, this prediction holds only if Bitcoin prices remain above $75,000-$80,000 throughout January.

Similarities in Bitcoin Price Action Across Cycles

Bitcoin 1-week Chart Source: BTC/USDT on TradingView

Back in 2021, Bitcoin's weekly structure exhibited a bearish shift as prices fell below moving averages, marking a significant trend change. A brief rebound to the 50-week moving average occurred before the market succumbed to bearish conditions.

Currently, a similar bearish structure is emerging, as indicated by a recent drop below the weekly moving averages. We may expect a price rebound toward the resistance zone of $101,000-$103,000. However, if Bitcoin falls below $75,000 and maintains this level in January, it could trigger a bear market.

Conclusion

Understanding the intricate dynamics of Bitcoin's market trends is essential for traders and investors alike. With critical price levels to watch and historical patterns to consider, careful observation will be key in navigating potential challenges ahead.