Bitcoin Looks Increasingly Like It Did in 2022: Can BTC Price Avoid $68K?

Bitcoin’s onchain data points to a major Bitcoin price drop in the making, while a bearish technical structure projects a drop to $68,000.

Bitcoin’s market structure is increasingly mirroring the first quarter of 2022, a period that marked the beginning of the bear market. Two years ago, the cryptocurrency was trading around $33,000, which was the end of a long bull run that began in 2020. The bear market was characterized by a significant decline in price, with Bitcoin dropping to its yearly low of $15,500 in November 2022.

Key Takeaways

Bitcoin’s onchain structure is increasingly resembling the first quarter of 2022, risking a deep bear market if key levels are lost.
Bitcoin’s bear flag targets a $68,100 BTC price, which would result in a 27% drop from current levels.
The cryptocurrency is showing early signs of a deeper correction, with onchain data and technical analysis pointing to a bearish market.

Onchain Data and Market Structure

Bitcoin’s onchain data, as provided by Glassnode, shows that the cryptocurrency has dropped toward and found support near its True Market Mean, currently at $81,500. The True Market Mean represents the cost basis of all non-dormant coins, excluding miners. This level has historically been a dividing line between a mild bearish phase and a deep bear market.

The chart above shows that the BTC/USD pair traded above this level from January 22 to May 5, 2022. When Bitcoin dropped below this level on May 6, the price lost a further 61%, bottoming at $15,500 in November of that year. The current price action is showing a similar pattern, with the cryptocurrency trading above the True Market Mean but struggling to maintain support.

Supply Quantiles Cost Basis

A Supply Quantiles Cost Basis model, which tracks the entry price of the largest coin clusters, also shows that Bitcoin’s price has fallen below the 0.75 quantile, placing more than 25% of supply underwater. This has created a fragile balance between the risk of top-buyer capitulation and the potential for seller exhaustion to form a bottom.

Bull Score Index

CryptoQuant’s Bull Score Index offers a more granular view of the market conditions, which has fallen sharply since August and dropped below 40 in October. The metric has remained flat throughout November despite short-term price volatility, indicating that the market is in a bearish state.

Bear Flag and Price Target

Bitcoin’s latest recovery attempt was rejected by stiff resistance around $93,000, data from Cointelegraph Markets Pro and TradingView shows. This level corresponds to the yearly open and the upper boundary of a bear flag, as shown on the two-day chart below. A break and close below the flag’s lower boundary at $91,000 will validate the bear flag, opening the door for a fresh downtrend toward the measured target of the pattern at $68,150, or the previous all-time highs of 2021.

Momentum Indicators

Momentum indicators, including the relative strength index, or RSI, remain sluggish at 40, suggesting that market conditions still favor the downside. However, a break above $96,000, supported by a positive Coinbase Premium, will invalidate the bearish pattern and indicate a potential reversal.

Conclusion

Bitcoin’s onchain data and technical analysis point to a potential deep bear market if key levels are lost. The cryptocurrency’s market structure is increasingly mirroring the first quarter of 2022, and the bear flag targets a $68,100 price. While there is always a risk of a sudden reversal, the current market conditions suggest that a downward trend is increasingly likely.

Frequently Asked Questions

Q: What is the True Market Mean, and how is it related to the bear market?

A: The True Market Mean, or the Active-Investor Price, represents the cost basis of all non-dormant coins, excluding miners. It is a key level that marks the dividing line between a mild bearish phase and a deep bear market.

Q: What is a bear flag, and how can it affect Bitcoin’s price?

A: A bear flag is a chart pattern that forms when a stock or cryptocurrency experiences a sharp decline, followed by a bounce and reversal. If the price breaks below the flag’s lower boundary, it can indicate a fresh downtrend and a potential price target.

Q: What is the Bull Score Index, and how does it indicate market conditions?

A: The Bull Score Index is a metric that measures the overall bullishness or bearishness of the market. A low reading indicates a bearish market, while a high reading indicates a bullish market. In the current case, the index has fallen sharply since August and dropped below 40, indicating a bearish state.