Mark Twain said that history doesn’t repeat, but it often rhymes. According to potential fractals that mirror the previous record-breaking rallies, such a scenario may be possible in Bitcoin.
While the conditions aren’t quite the same for an exact repeat, there could be enough for the price action now and then to rhyme just enough. Let’s take a closer look.
Bitcoin Fractal Record Breaking, but Is it Valid?
Markets have a cyclical nature and the patterns that repeat are so common in them, you can use these patterns to forecast the future. Statistics have shown that most technical patterns are based on geometric shapes such as rectangles and triangles.
However, not all situations are as clear. Fractals are repeating patterns that mimic the past price actions. When fractals appear, they aren’t a perfect repeat of the situation before, but can yield similar results.
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The fractal in question is a setup from October 25, 2019 – in the past dubbed the “Xi pump” or “China pump.” Bitcoin price had swept support after more than a month of grinding against it, only to sharply reverse.
Price action was reversed, but the short squeeze and FOMO that followed led to an unprecedented 44% increase in just 48-72 hours. It was the third-largest single-day rise in the cryptocurrency’s history.
Prices mimic fractals starting in October 2019. Source: TradingView.com.| Source: BTCUSD on TradingView.com
Crypto Bulls: Will the Death Cross Bring New Life?
This fractal is very similar to October’s price action. As you can see, the peaks and valleys are well-matched.
Bollinger Bands being turned on can reveal a similar setup. This is perhaps even more interesting. Twelve-hour BTCUSD timeframes showed a similar pattern. Then, the close was very similar outside of Bollinger Band. Bitcoin’s price reversed after a short pause, and then a couple of doji.
Bollinger Bands may snap BTC to $60K -- Source: BTCUSD at TradingView.com| Source: BTCUSD on TradingView.com
There is the potential to record-breaking historic reversals if this pattern continues or rhymes. It was October 2019. There was a 44% increase in days after that.
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A further 44% increase would bring Bitcoin to $61,000 per coin, and could be achieved in just days. Fractals, however, aren’t valid, statistically proven patterns with any probability behind them. While they may look similar to past price action, they are not statistically proven to produce the exact same result.
Is Bitcoin a new death cross? Source: BTCUSD on TradingView.com | Source: BTCUSD on TradingView.com
Finally, there is a looming “death cross” on the daily, which also appeared around the same time as the so-called China pump. A death cross happens when the a short-term moving average – the 50-day MA – crosses below a long-term moving average – the 200-day MA.
Despite all the similarities, the fractal above should be taken with a grain of salt – salt that may end up in the wounds of bears should this pattern play out.
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Featured image taken from iStockPhoto. Charts from TradingView.com