Bitcoin (BTC) is showing initial indications of a more substantial correction, as its latest recovery stalls at $93,000. Recent analysis indicates that Bitcoin’s “market structure” increasingly resembles that of early 2022, which marked the onset of the bear market.
Key insights:
The on-chain structure of Bitcoin is similar to early 2022, posing a risk of a significant bear market if crucial levels fall.
The bear flag pattern for Bitcoin points toward a price of $68,100.
Bitcoin on-chain data suggests early bear market
Bitcoin has declined and found support close to its True Market Mean, which is currently at $81,500, according to on-chain data provider Glassnode.
The True Market Mean, often referred to as the Active-Investor Price, denotes the cost basis of all active coins, excluding those held by miners.
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“This level typically signifies the boundary between a mild bearish phase and a profound bear market,” Glassnode stated in its recent Week On-chain report, adding;
“While the price has recently stabilized above this threshold, the overall market structure increasingly mirrors the dynamics of Q1 2022.”
The chart above illustrates that the BTC/USD pair traded above this level from Jan. 22, 2022, to May 5, 2022. Following a drop below this level on May 6, the price plummeted an additional 61%, hitting a low of $15,500 by November that year.
This similarity is supported by a Supply Quantiles Cost Basis model, which monitors the entry price of the largest clusters of coins. Since mid-November, Bitcoin’s price has dipped below the 0.75 quantile, currently trading near $96,100, leaving over 25% of supply below water.
This situation has created a precariously “fragile balance between the risk of top-buyer capitulation and the possibility of seller exhaustion forming a bottom,” Glassnode remarked, adding:
“The current structure remains highly sensitive to macroeconomic shocks until the market can reclaim the 0.85 quantile (~$106.2K) as support.”
CryptoQuant’s Bull Score Index provides a more detailed perspective after experiencing a sharp decline since August and falling below 40 in October. Despite short-term price fluctuations, the metric has remained stable throughout November.
The latest reading falls within the 0-20 range, indicating deep bearish conditions, akin to those seen in January 2022, as shown in the chart below.
As reported by Cointelegraph, Bitcoin’s price movements reveal further similarities with the 2022 bear market.
Bitcoin’s bear flag aims for $69,000
Bitcoin’s recent recovery attempt encountered strong resistance at around $93,000, according to data from Cointelegraph Markets Pro and TradingView.
This level aligns with the yearly opening and serves as the upper boundary of a bear flag, as illustrated in the two-day chart below.
A breach and close below the flag’s lower boundary at $91,000 will confirm the bear flag, paving the way for a new downtrend targeting the measured price of $68,150, or the previous all-time highs from 2021. This would lead to total losses of 27%.
Momentum indicators, such as the relative strength index (RSI), remain sluggish at 40, indicating that market conditions still lean towards the downside.
As reported by Cointelegraph, the bearish pattern will be nullified if bulls manage to push the price above $96,000, backed by a favorable Coinbase Premium.
This article does not contain investment advice or recommendations. Every investment and trading decision carries risks, and readers should conduct their own research before deciding.
This article does not provide investment advice or recommendations. Every investment and trading decision comes with risks, and readers should independently verify information before making choices. While we aim to offer accurate and timely information, Cointelegraph does not assure the accuracy, completeness, or reliability of any information presented. This article may include forward-looking statements subject to risks and uncertainties. Cointelegraph accepts no liability for any loss or damage resulting from reliance on this information.
