Over the last 10 years, Bitcoin has printed a very clear trend and the halvings have been a key factor in each individual intermediate market cycle as well as the entire macro market cycle starting from $0. From the past to the present, following the path that has been set, points to a very clear trajectory of nauseating gains. This halving, in particular, is a historic one for many reasons. One of which is that this is the first halving where Bitcoin has futures markets, since they opened at the end of 2017, giving the ability to traders to leverage their capital to bet on the future direction of Bitcoin - allowing them to profit in either direction long or short. The block reward that once was as high as 50 BTC is now being reduced to a ruthless 6.25 BTC within the next 24 hours, which will forever change the mining industry for the rest of Bitcoin’s life as an asset. So will Bitcoin continue the trend going forward? Let’s dive in and analyze.
One thing that can be said about Bitcoin is that it is remarkably consistent. Once a trend begins, it’s set on it and it would take a market shaking event to shift the direction. There isn’t a lot of data, seeing that we’ve only had two historical halvings, but the trend of the last ten years is undoubtedly clear. Bitcoin’s primary market cycle began in 2010 and has continued to this date. This market cycle can be divided into 2 individual intermediate market cycles:
Each intermediate market cycle can be divided into 3 phases:
- Halving - represented by each blue vertical line on the x-axis
- ATH(All Time High) - 1 year later
- Correction - Capitulation
Within Bitcoin’s consistency, you can find macro trends, micro trends, and commonalities across any time frame. For instance, Bitcoin is extremely reactionary to the .618 - .786 Fibonacci Retracement channel in both the short term and the long term on a macro scale - these trends are best represented on the weekly chart. Over the last decade, Bitcoin has found key support on the .618 - .786 Fib. channel during each phase of bearish consolidation inside of the macro trend. Historically, Bitcoin has found this support approximately 8 months prior to the upcoming halving before beginning an uptrend going into the halving. The key supports are represented by the yellow support lines in my chart.
Following the halving, Bitcoin has continued the uptrend for approximately 12 months before reaching a new all time high. Each breakout can be measured using a power trendline and can be applied to the next cycle in order to find potential future targets. If the 2021 breakout is symmetrical to the 2012-2016 market cycle, then Bitcoin would be targeting roughly $90,000 - $120,000 as its primary breakout target. If the target is reached, then the next fibonacci support is measured from the current potential breakout target and from there we can determine the next market cycle. Compiling all of that, I have created the potential roadmap for Bitcoins future market cycles, contained inside of the white progression channel represented in my chart. If the cycle stays to course, Bitcoin would be targeting $300,000 by the end of 2026.
Other major areas of interest for Bitcoin’s macro trend are the following:
- The 200 Week Moving Average - Bitcoin’s primary macro moving support
- Key Support & Resistance areas are found within the .618 and .786 channel
- Finding Breakout targets both to the upside & downside using candlestick patterns or Elliottwave Theory (What I Use)
- The confluence between the 50EMA & 100EMA on the Daily and Weekly time frames
- Using slow & fast moving momentum oscillators… i.e. RSI & Stochastic RSI
- The Historical Data in terms of the flow and movement of BTC
So what does that mean for the average person going into the halving? We are all going to get rich? RIGHT? No, not necessarily.
Out of transparency, before getting into anything further, I will disclose that I am and have been bearish on Bitcoin over the last year or so - since the late June/Early July blow off top. In the past, I was macro bullish on Bitcoin and was for a long time. I actually made the chart that I presented above during the bear market in 2018. But what happened last year raised a fair amount of concern for me, as well as many other people who choose to analyze this market realistically, that the macro trend had been damaged. Initially it was concerning because it had the appearance that Bitcoin began to rally too early. Which ,admittedly, wouldn’t have been the end of the world. Sure it would mean that we didn’t take much time building support, but if we were truly on the path to $100k by 2021, a strong support at $3k - $5k wouldn’t be overly necessary.
However, Bitcoin’s rejection and subsequent dump put that concern to shame. This is because it changed the entire structure of everything we had gone through in 2018. Its rejection meant that the rally was simply a B wave or in other words, or just a corrective rally. This was a big deal because it was significantly larger than anyone had anticipated, meaning that we would have to spend at least another year to finish off a larger final phase of the correction. Yet again, Bitcoin would neglect keeping the long term interest in mind. The failure to build a foundation of critical support puts us in danger of falling into the price range of the previous market cycle, which has never happened before in Bitcoin’s macro trend. An event like this would destroy the long term ascending trend between market cycles if Bitcoin set a lower high across market cycles. Creating the first long term descending trend in Bitcoin’s history.
Now all of that may not come to fruition - we don’t necessarily need to follow wave structure. They are guidelines, not rules. But aside from just structure, there are several other things that separates this halving from the two that came before it. Bitcoin is in a fundamentally different situation than it has been in the past during this phase of its intermediate market cycles. So if you’re interested in hearing the reasons why, I’d be happy to present my perspective of them - you won’t find a more realistic analysis anywhere else.
If you are someone who doesn’t want to consider the potential for bearishness and you only clicked this post because you saw the word halving assuming that I was going to tell you that we are bullish and going to the MOON, then thanks for reading, but:
Applying an upward sloping Fibonacci channel shows a clearer pircutre of why what we are seeing in the market right now is different than historical market cycles. The lack of data makes things more difficult, but observing what we do have, there is a clear trend that each market cycle is becoming less influential on the price as time goes on. This would be expected, as price rises without a corresponding volume increase from new buyers then the price will stagnate. There is nothing wrong with a 20% gain, that’s incredible to happen in only one year, however it does mean that targets around $100,000 will likely never be reached. Bitcoin has also been struggling with the 50% support level, with the move down yesterday briefly breaking through it. A break below this would be catastrophic to the trend and would take BTC down to test the bottom support of the channel - around the $1,000-$1,500 region. Although it wouldn’t completely break the trend unless it broke below $1,000, it would be incredibly harmful to the macro trend and an indication of almost no strength coming from the bullish side of the market. It is pretty clear that on a macro scale, bulls are in control of BTC, but right now the bears are in control of the micro trend. If BTC breaks this support, the odds for the bears taking dominance of the macro trend drastically increases.
Continuing on the macro trend, BTC has been struggling with its critical support on the 200 week Moving Average. While in 2018 the bulls scraped by and it was a very close call, on March 12th the price smashed through it with the price showing almost no immediate reaction to it during the fall. While it did recover above it eventually during the following week, it is discouraging that the price was able to smash through it like it did. This is another indication that the bulls just haven’t spent enough time building support. Rather than trading on top of it to fortify its support, BTC’s reaction is to run away from it as soon as possible. Not only does this quickly exhaust momentum, but it suggests a lack of confidence in the bulls that it will hold. If the bears are able to go at it again with the same aggression, but from a lower level, I have little doubt that they will smash through it again - but go significantly lower past it next time.
The 200 & 100 Daily moving averages are also being put to the test. Both of them were able to act as support during the fall yesterday at $8,000. If they are broken both would act as resistance during any rebound and, with a strong enough move would likely result in yet another death cross on the daily charts. A death cross from where we are at in both price and time would be devastating.
Moving in closer and looking at the intermediate term, Bitcoin’s stiff rejection was very unsurprising. Bitcoin failed yet again to break its intermediate resistance trend line and didn’t even manage to reach its macro resistance trendline that it has been stuck under for 3 years. While it doesn’t mean that all hope is lost, this is not what you want to be seeing. It means that Bitcoin’s momentum is still completely under bearish control, indicated by its rejection as well as the fact that BTC was extremely exhausted while it was still in the process of even approaching that range of heavy resistance.
At this point, I am still wondering where any bullishness is coming from. Much to the disappointment of some, I have repeatedly said over the last few weeks that there have been indications that this entire rally was still very bearish. The fact that the Daily momentum managed to reach overbought was slightly surprising, but there were so many signs foreshadowing this rejection before going into it.
What we saw was classic Bearish Divergence across several major time frames on the momentum oscillator, which is another thing that I had warned was going to happen - the most significant of which was the divergence on the daily time frame. Inside of the local trend we also had Bearish Divergence on the daily histogram, indicating that buyers momentum was not sustainable at $9,000 - $10,000. If the buyers do not step in here at the local support, we will very quickly end up with a bearish crossover on the daily histogram, leading into another period where selling will outmatch the buying.
I would like to take the opportunity to emphasize the importance of these indicators and divergences. As an investor, it is incredibly easy to become distracted by the flashing lights of $10,000 or by price levels that you perceive as bullish. But in every market there are Market Makers, who are traders (not investors) controlling a substantial amount of capital who manage or “make” the order books. The process goes like this: A trader places a limit order, usually with buy/long orders at support areas or sell/short orders at resistance areas. If a Market Maker agrees with that limit order, they are the ones that fill it. This is how support and resistances are actually formed, not only because these are areas where large numbers of traders will place trades at, but because these are the areas where the traders who actually have an impact will place trades at. Sometimes these makers will even place their own limit orders, if you have ever seen a trade inside of an order book that is $10,000,000+ it was very likely a Market Maker, but these orders rarely sit long enough to actually get filled. This is because market makers try to hide what they are doing as much as possible, simply because they are trading against you and even other market makers.
Although this process sounds sinister or malicious but, on a fundamental level, all trading is a competition. I am competing against you and you are competing against me. But market makers and traders with enough experience understand that these markets are largely psychological based - or a matter of perception as I mentioned earlier. Market makers will try to play with the psychology of traders who are unaware of this by hiding what they actually plan to do by covering it up with things that would influence the average traders psychology. Most analysts will mention what they believe are psychological levels, for instance $8,000 or especially $10,000 are widely believed to be strong psychological levels for Bitcoin, with most traders perceiving the market as bullish if it can break these levels. These Market Makers are where they are at because they are good at what they do and understand your perception more often than you understand your own perception. So Market Makers will push to or past these levels to get the market thinking bullish, then dump. They do this so they get a position before anyone else and the rest of the markets sell or short orders will fill the books, acting as a catalyst for substantial profit. Liquidations are especially useful for adding fuel to the fire, on Saturday for example $500M longs were liquidated. When a position is liquidated, an order is automatically placed in the order to close that position. Sell orders are used to close longs and buy orders are used to close shorts. As all those orders get filled it results in a catastrophic landslide of EPIC proportion.
The point that I am trying to make here is that the price action that you see is largely all a part of a larger design. It is fake, designed to make you think or feel a certain way. Market Makers or experienced traders understand this and are aware of this fact and will usually trade against the direction that the market appears to be going. Obviously, not at random otherwise they would get wrecked, instead they wait for things like divergences or climax moves like substantial green/red candles to short/long - shorting large green candles or longing large red candles. Things like this, especially divergences, act as small windows that reveal what is actually going on that is being hidden inside of the price action.
Although the price went to $10,000, the Bearish Divergence that printed on every major time frame showed what was actually going to happen before the price even topped out. So your boy here proudly got a short position at $10,049 and shorted the absolute top.
So where do we go from here? I think we just saw the absolute local top. I think the small halving run finished up and we head back down to the lows from here. Does that mean we are going straight down from here? No of course not. Bitcoin is certainly capable of heinous rips to both the upside & the downside, but I’m fairly confident that we will see some kind of decent pullback close to the top. So I have closed my short and opened a long position at $8,200 for a pullback to the $9,200 - $9,700 region. Is that the only possibility? No, but it is one that I am fairly confident in. If the bulls can manage to push back above the local top, then the move down that I am projecting becomes invalidated. However, even if the local top is broken does not ensure that the bulls have 100% taken control of the trend. I have charted this move out as a B wave in a larger ABC correction. B waves can retrace as much at 110% - 127% of the initial A wave down. Therefore the price would have to break $11,200 - $12,400 before it can be ruled out with absolute certainty that this isn’t simply a correction. But those are just guidelines and not set in stone, in my opinion, anything above $10,500 - $10,950 would very likely indicate bullishness as long as price action permits it.
If you pull the fibonacci retracement tool from the macro absolute top to the macro absolute (temporary in my opinion) bottom, you’ll see that the most recent “bull” run had a blow off top at the .618 - .786 retracement channel - which is the golden fibonacci region & is the point of interest mentioned earlier. This is important in confirming that the $13,000 - $10,000 price range is a very important resistance range, as well as indicating that this is still all a correction from the initial run up to $20,000. Applying this model shows a potential move to the $2,100 region, in confluence with the 1.618 extension for the C wave of the local correction. However a point to emphasize, in support of the bullish argument, is that the .618 - .786 retracement ( again as mentioned above) is at $3,100. This could potentially indicate that the bottom is in & that we are not headed back down to the $3,100 region or that we could potentially see a double bottom at $4,300 - $3,100 - but this is not a guarantee. You can’t make this stuff up, there is so much confluence there that it is unbelievably difficult to imagine that the price won’t hit this region again - the chart is basically screaming it. Therefore the bulls will try to form a significant support at $4,300 - $3,100, particularly $3,800 - $3,100, in an attempt to force a double bottom. But the trend is your friend and it is trending for a reason, because the selling is out powering the buying. So if the trend continues then $3,100 will be at a high risk of being broken.
Now I’m not much of a pattern trader. There is too much manipulation of the price action along with everything else I had mentioned earlier that I am usually not very comfortable with trading based on patterns. I use Elliottwave as my primary strategy because I like to try to predict the flow and the waves of where the market is headed, which I have proven to be pretty friggen close in mapping out all of this, because I think patterns are just another tool for Market Makers to utilize in trying to manipulate your perception. But looking at this there is a chance that we saw some kind of bull flag here before breaking to $10,000 before falling back below it. As a result of breaking below it, we also broke back below the intermediate resistance at $9,200 - $9,500 that had briefly acted as support, which will now act as resistance again on a backtest.
In the event of continuation down, I want to emphasize the significance of the support at $7,800 - $7,600. While it has acted as support/resistance during this local uptrend, this trend has moved correctively, moving up very slowly and in typical 3 wave-sideways chop fashion. The leg down could behave similarly, since it is still a C leg in a larger correction but ABCs are made up of 3-3-5 or 5-3-5 structures. The A wave that we saw at the beginning of March was undoubtedly a 5 wave structure, therefore the C wave has to be 5 waves as well - since there is no such thing as a 5-3-3 structure. More often than not, 5 wave structures are impulsive, so 5 rapid/strong moves to the downside, in a sequence of an impulse; correction; impulse; correction; & impulse. Although they are rare, a 5 wave structure does not have to be impulsive, they can be corrective in nature. It can form a WXYXZ, 3-3-3-3-3 substructure, if the bulls can successfully mitigate the dump. But based on the first leg that we saw to the downside two days ago, it does not appear to be 3 waves, therefore it will likely be 5 impulses with another impulse to the downside after retracing wave 1. Looking at the last impulse we got in the A wave, $7,800 - $7,600 was the last support we saw before ripping all the down. If this moves impulsively then that region will be our final range of support before ripping down to $4,000 - $5,000.
But the halving is set to commence within the next few hours and emotions are sky high - more on this later - and the FOMO right now is through the roof. As of now, there isn’t much volume but if the bulls can manage to bring the heat buyers can FOMO this entire move back up in a rapid fashion then all hope is not lost. If the bulls manage to hold an absolute bottom of $7,600 and do not allow it to break and close below it, then this could be the most bullish structure imaginable for Bitcoin - the LEGENDARY 1-2-1-2. This structure is incredibly rare, so rare that it almost never happens, but when it does the move is absolutely MASSIVE. If it does play out, it would be on pace to be targeting $26,000 by September of this year.
However, I cannot emphasize enough how rare this kind of move is. In fact, I didn’t even want to include it because I didn’t want to be the source of any false hope. What I value here is a realistic perspective coupled with honesty. I’ll say again, you won’t find a more realistic analysis anywhere else. The reality is, the chance that it could be a 1-2-1-2 is highly unrealistic, but not impossible. So in honor of it being possible, I decided to include it.
So, now that the analysis is over with, let’s get back to what you came here for. The halving is projected to take place at some point within the next few hours. I don’t mean any offense by this, but the halving is one of the most irritating things about this market. Not at the fault of the average person, that would be shooting the messenger, but I find the people falsely creating this narrative extremely irritating. People at the tops of the industry like the Winklevoss brothers, Dan Morehead, or Tim Draper (the worst of them all), have gained respect simply for telling people what they want to hear while using falsifiable, baseless claims to try and justify their outrageous “predictions”. I can only assume that they are aware of how crazy they sound, or at least I hope so, otherwise they got to where they are at now completely detached from reality.
The primary argument is usually that BTC appears to move in cycles, like what I have presented above. At first glance, it does appear that BTC has been growing exponentially, with the most significant growth corresponding around the halving dates. However, IF this is the preferable argument, one would have to justify why this market cycle has broken that trend. This is the first halving that Bitcoin has had going into it while in a downtrend. Previously, Bitcoin has bottomed and began a steady uptrend approximately 8 months prior to the halving, then continuing that growth thereafter. Based on the local trend (the last 3 years) there is zero evidence that BTC has bottomed, rather there is much more evidence that BTC has topped out again. While that doesn’t necessarily mean that the long term trend of growth has been broken, it makes it significantly more difficult to make the argument that the halvings have anything to do with facilitating Bitcoin’s growth.
The next argument is probably the most popular argument that people like to make and it is one that falls in on the rest of the others after breaking it down. This is the supply & demand argument. This argument is the easiest to falsify because anyone who would try to make this argument does not understand the halving itself as well as basic economics. Simply put, the halving does not impact the supply of BTC what-so-ever. Bitcoin’s supply will always be locked at 21M. Nothing more, nothing less. Rather, it impacts the rate at which it is produced. Therefore the event doesn’t change anything for the vast majority of people in these markets, the only people that this would be significant for are miners - specifically retail miners.
In order for the supply/demand argument to hold any water, it would need an increase in demand to correspond with a decrease of supply in order for the price to increase. If it will only impact a minority group of the market, it would make zero sense for the demand of the broader market to increase. The way that it works is that the mining reward will be cut in half, therefore the price would have to double in order for miners to maintain the current profitability. So the only people who will be directly impacted by this are those that cannot afford the cost to mine without profit. In the past, these miners were able to double the price with an extremely small allocation of capital because the market cap was a small fraction compared to what it is now. These miners cannot move the market like they once were able to. So in no way, shape or form, does the halving have an impact on a large enough scale to cause a market surge. Anyone who says differently has either bought into the FOMO or they are creating it.
But this halving will likely be a very significant one. Not because of an explosion in value, but because it will likely represent the extinction of retail BTC miners. After this halving, it will be extremely difficult or even impossible for retail miners to continue mining. This changes things more than you might expect, the most significant being a drastic reduction in the number of miners on the network. Due to a reduction of the reward, miners will either have to capitulate or will have to mine in a mining pool. Since the only remaining miners will likely be institutional farms or mining pools, this means that BTC will become centralized. With the network centralized around a small group of powerful miners, this opens the door to large scale corruption as well as potential damage to the network through things like a 51% attack. Having a network that is distributed among a large group of miners divides the hash rate. But with such a small group of miners coupled with the fact that the remaining miners are those with a significant amount of capital means that the average person has little to no power any longer in these markets and the little guy will play little to no part in the future of the network. BTC is no longer a decentralized haven, free of human error, but based on mathematics. It has become politicized and will no longer represent the liberating technology that it once was. So the halving does literally represent the end of BTC as we know it.
The final thing I would like to address is the idea that BTC is somehow a hedge against traditional markets. Somewhere along the line the word “decentralized” got confused with the idea that these markets must behave inversely to “centralized” markets, regardless of historical price action. The reality is, in the long run, BTC has always moved identically to traditional markets. Yes it is isolated from from things like politics (ironically not anymore) or inflation. But if you compare the traditional markets to BTC, they paint an extremely similar picture.
Looking at this picture, I have no idea how the suggestion that BTC doesn’t follow traditional markets can be seen as legitimate at all. BTC is an equity. And as long as the sentiment surrounding the global economy remains grim, the global equity markets will face a period of stagnation. The impact that this will have on the cryptocurrency markets is uncertain. But what is certain is that the trend that BTC has followed is forever changed. It cannot be said at the current moment if BTC has climaxed or if it will continue to grow. But I would be fairly confident in saying that the rate of which it will grow, as well as the historical trend of market cycles, will never be the same.
What does that mean for crypto? Fundamentally, it could potentially change the nature of these markets forever. But that doesn’t change what has happened here. We have witnessed one of the greatest stories mankind has ever told. We have pushed the idea of what an investment is to the far extremes. These markets have a beautiful story and they shook the global establishment to its core. So it shouldn’t be a disappointing thing if these markets are no longer the same. Although it very likely will not be in the form of cryptocurrencies, Blockchain technology will eventually change the world. You and I have the privilege to say that we were a part of it.