Bitcoin (BTC-USD) started 2022 around $44,000 with most analysts believing that the mythical $100,000 would be broken in the ensuing months. Instead, Bitcoin sits today at just under $17,000, in the midst of a historically deep bear market.
2023 promises to be a challenging year for Bitcoin as the world's premier cryptocurrency stares at not one but two "death crosses".
Bitcoin is in for a rough start of the year, but I believe that in the next few months Bitcoin could find an all-time low, and begin its next bull phase. With that said, I'd expect a lot of sideways movement before a true crypto rally starts in earnest.
Moving averages are commonly used indicators in technical analysis. When the 50 day moving average crosses below the 200 day moving average, this is called a death cross and is considered a bearish indicator.
For the first time in Bitcoin's history, it looks like the 50 day moving average may cross below the 200 day moving average, on the weekly chart.
This could happen in the next few weeks if Bitcoin's price remains at these levels or lower. Furthermore, the RSI is very oversold on the weekly chart, and the MACD also looks ready to give us a bearish crossover.
This is all in line with expectations I have laid out before that Bitcoin should find a final bottom at around $14,000
Bitcoin is about to undergo a historic and never seen before bearish crossover, and a few weeks ago, the cryptocurrency also experienced a bearish crossover in the Bitcoin Hash Ribbons.
The Bitcoin hash ribbons are used to measure the strength in the Bitcoin mining market, but they can also tell us a lot about the Bitcoin price. The hash ribbon indicator comprises a 30 day Moving average and a 60 day Moving average of the hash rate.
When the 30 day moving average crosses below the 60 day moving average, this usually indicates miner capitulation, while a crossover of the 30 day moving average above the 60 day moving average is seen as a positive signal.
Back in August, we got a bullish crossover but last month we once again saw the 30 day moving average go below the 60 day moving average. Miner capitulation could lead to increased selling pressure for Bitcoin, which could accelerate the current sell-off.
Despite the currently bearish outlook for Bitcoin, I am still bullish for Bitcoin in 2023. Bitcoin should find a bottom in the year's first half. However, this doesn't mean that we will immediately take off towards new highs. More likely, we will see some "sideways" action for the year's second half, like we saw in the previous Bitcoin cycle.
Let's take a walk down memory lane. Back in 2017-2018, Bitcoin was at the height of a bullish rally, where Bitcoin's price neared $20,000. However, over the next 12 months, Bitcoin's price began a descent which would see the cryptocurrency lose over 80% of its value.
In December 2018, Bitcoin bottomed just above $3000. Over the next few months Bitcoin's price more than quadrupled, only to then be followed by a sell-off which would see Bitcoin retest the lows it made in December.
Bitcoin retraced nearly 88.7% before it put in a solid bottom, after which we saw a fast and furious rally that took Bitcoin to new all-time highs in 2021.
This type of price action is typical of the Bitcoin cycle and of an Elliott Wave impulse, where wave 1 is followed by wave 2, which can retrace a significant amount. Only after this 1-2 setup, are we ready to rally convincingly in a wave 3 towards new highs.
I expect Bitcoin to follow a similar pattern after it finds a bottom in the year's first half.
In conclusion, Bitcoin's start to 2023 should be a mirror image of the start it got in 2022. When everyone was looking for a rally to new all-time highs, we got a massive sell-off. Now, just as everyone is expecting Bitcoin to crash and burn, I believe the cryptocurrency is set to give us a significant rally once it finds a bottom in the next few months. This rally could provide us with a significant investment opportunity since Bitcoin's price could easily double or triple in a matter of months. However, following this, I would expect Bitcoin to give us a final opportunity to enter the market in a pull-back that could take us near all-time lows later in the year or even into 2024.
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Disclosure: I/we have a beneficial long position in the shares of BTC-USD either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.