29 November 2021: After Bitcoin tumbled nearly 20% from its previously minted all time high at $69,044, mainstream outlets - including the likes of CNBC, Bloomberg, Yahoo, and others - have already claimed that Bitcoin has entered a bear market. While a 20% decline in other assets classes is historically indicative of a bear market, this is not the case in the cryptocurrency market. This week we will cover the cryptocurrency market in depth and give our analysis on its potential direction for Q4 2021.
Weekly Markets 1.15
It has been yet another fearful week in the cryptocurrency market with many different projects suffering even bigger losses. Of course, with mainstream news & business outlets already claiming a cryptocurrency bear market, should you buy into the story?
If declines of 20% were immediately indicative of a reversal into a bear market, the correction in May that say many assets fall by over 30% or more should have triggered the end of the bull run. However, since then many coins have netted new all time highs. Despite a bearish outlook growing in scope, historical probabilities within the cryptocurrency sector indicate this could be the last major shakeout of the year before a final leg up to finish out Q4 and potentially run into Q1 2022.
The main news stories of the week are available below:
Introduction into the Avalanche Network (AVAX) is now available (RekTimes)
Major outlets claim Bitcoin bear market due to new Covid strain (CNBC)
Thailand looks to attract Crypto Millionaires through revitalized tourism (Decrypt)
- El Salvador plans to build world's first 'Bitcoin city' backed by bitcoin bonds (Reuters)
WHO claims risks due to Omicron Covid variant as world imposes fresh restrictions (Reuters)
Twitter stock rises on news that Jack Dorsey is stepping down as CEO (Associated Press)
Food & energy costs continue to surge globally (Associated Press)
- Tensions continue to rise over refugees entering Europe (BBC News)
Crypto Economy & Markets
The main focus this week in cryptocurrencies is the obvious: is the market truly entering bear territory? While Bitcoin and Ethereum have indeed climbed from the recent lows, so far momentum has been slow and fear still high. That said, there is a considerable amount of both positive and negative press being thrown out from different sides.
Sources like Bitcoin Magazine have routinely been challenging the market decline through FOMO-like articles, sources, and postings. On the contrary, Bloomberg and CNBC are fully backing the bear market story.
In reality - if declines of 20% were immediately indicative of a reversal into a bear market, the correction in May that say many assets fall by over 30% or more should have triggered the end of the bull run. However, since then many coins have netted new all time highs. Despite a bearish outlook growing in scope, historical probabilities within the cryptocurrency sector indicate this could be the last major shakeout of the year before a final leg up to finish out Q4 and potentially run into Q1 2022.
How far up could this final leg go up though when its all said and done? Potentially not as far as many believe but it remains to be seen.
In the past week, the total cryptocurrency marketcap has risen around 3% following last week's major volatility. The total cap is currently retesting below its 50 day moving average (DMA), appromixately 30% above the 200 DMA.
Over the past week, Bitcoin has fallen another 3% after last week's double digit decline. Presently, Bitcoin is attempting to break above resistance at $57,400 which could potentially indicate a positive reversal. It should be noted however that Bitcoin is in a definitive downward trend over the very short term.
Long term, Bitcoin remains in an upward trend unless the bottom support of $40,000 USD is breached.
The next 24 hours are extremely important for a short term direction on Bitcoin. With a daily candle close above the $57,400 mark, this could allow Bitcoin to restest the 50 DMA and potentially the top of the channel at ~$65,000. This would be confirmed with a daily candle close and a successful check of new support at current levels.
If Bitcoin fails to remain above this level, Bitcoin has a high probability of retesting the lows at $54,000 and a moderate probability of declining to the bottom of the channel rising up from ~$50,500. With only a month remaining in Q4 2021, Bitcoin needs to remain above the $50k mark to have any substantial probability of reaching a new all time high of $70,000 this year - let alone the coveted $100,000 price point.
An interesting note for Bitcoin is the relation of current prices to the overall price channel. At its last all time high, Bitcoin was still over 15% off from the top of the price channel minted back in April. Currently, Bitcoin is 40% down from that level. The top of the channel could see Bitcoin hit $82,000 by the end of December 2021.
The overall takeaway here is to go against the wave of fear but also keep in check high expectations for the cryptocurrency market. With Bitcoin currently rallying, we expect a reversal in bearish sentiment back to a bullish one.
It is important to remember:
- The cryptocurrency market routinely sees corrections as large or larger than 20%
- Bitcoin is resting in the middle of its long term price channel that can run as high as $80,000 or as low as $41,500 by the end of Q4
- For Bitcoin to hit $100,000 in its current price channel, the bull market would have to continue until at least September 2022
A breach of the channel top on Bitcoin could allow parabolic price action that may see it hit that $100k mark faster but that would also be indicative of a potential "blow off top" scenario. While we rarely give price predictions, by our analysis we see Bitcoin with a moderate probability of hitting an all time high of $70,000 + and an very low probability of hitting $100,000 by either the end of Q4 or beginning of Q1.
World Economy & Markets
At this point, it is widely accepted that much of the global economy has entered into an unprecedented bubble. The notorious money printing of major world governments in response to Covid has led to inflated asset classes that includes everything from homes to commodities to stocks & crypto.
Inflation has been steadily increasing with some central banks having no true tools left to cope with it barring a major policy shift and potential deflationary economic crash.
The present global sociopolitical / economic enviroment is creating a situation in which:
- Reversing current monetary policy would lead to a deflationary crash and political suicide
- Not reversing monetary policy could lead to potential hyperinflation and a global currency crisis
No matter what policy changes occurr, inflation should be expected to rise continously into an estimated 2023. Thus, while a short term economic crisis is unlikely, the probability of a global crisis unraveling by 2023 is increasing steadily.
The Key Takeaway:
Institutional and mainstream adoption of cryptocurrencies is underway. Even if a bear market were to strike here in Q4 or later in Q1 or Q2 of 2022, with billions sitting on the sidelines there would be an immediate major demand spike for the biggest cryptocurrency assets in the world should a major price decline occurr.
This could potentially set up the shortest bear market in crypto history - one that everyone should utilize as potentially the greatest buying opportunity of this generation.
As this article was written, Bitcoin has sinced pumped above resistance at $57,400. With a daily candle close above this level, expect Bitcoin to make a run at the 50 DMA and potentially back to ~$65,000. As far as the long term market is concerned, it would take parabolic price action to see Bitcoin hit six figures anytime soon.
It should also be noted that a bear market should not scare anyone - it is the ultimate accumulation opportunity that could see massive returns come next bull run cycle.
RekTimes sees a moderate probability of fresh all time highs before the end of Q4 or by the beginning of Q1. Of course, this is not guaranteed. As always, we highly reccommend at least adjusting risk exposure in your portfolios to prepare for any unexpected outcomes. Be ready to benefit from potential returns as the bull market finishes up Q4 but also be prepared for the major accumulation phase of the next bear market.
Coming within the next week from RekTimes includes:
- Article on DAOs (Wednesday)
- Article on Algorand (ALGO) (Friday)
- RekTimes Weekly Markets 1.15 (Friday)
Best of luck over the next week! We have releases scheduled for later in the week with a potential bonus article coming as well. Weekly Markets returns to its normal slot on Friday.
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