To the dismay cryptocurrency investors, Bitcoin prices continue to drift sideways within an ever tightening trading range. The bearish sentiment across the space is among the most prominent in years — potentially more bearish than the 2018 bear market.
Here’s why this correction felt so much worse than Black Thursday despite BTCUSD being traded at approximately the same price one year ago.
Bull Market Could Have Blinders in Bitcoin Bearishness
Although you might not be able to tell by current price action or economic background, there are strong chances that Bitcoin remains in a bullish market.
According to Bitcoin market structure, which mimics an Elliott Wave Theory motive wave, the ongoing consolidation phase may lead to another unexpected surge upward.
Bitcoin Bear Market Comparison Says It Is Almost Time For Bull Season| Bitcoin Bear Market Comparison Says It Is Almost Time For Bull Season
There are five motive waves, three moving in the opposite direction to the primary trend. Two waves move in the opposite direction of the primary trend — the same direction as the bear market.
Waves that alternate up or down alternate with sharper and more sideways characteristics. Instuctions also refer to up-waves. They move along the same 5-wave pattern. The ABC pattern is the most common for corrective phases.
The wave 5 final wave, wave V | Source: BTCUSD on TradingView.com
The structure of the Bitcoin price is clear on all scales. These structures suggest that there may be an additional motive wave, possibly with a strong wave five.
The Ongoing Sideways is more painful than Black Thursday
It is possible that this could be the next wave. So why are sentiments so bearish about it? One, bearish sentiment can often be the driving force of wave 5. The trend is not improving at the speed that it did when market participants were involved. Profit taking is growing.
FOMO is the driving force behind wave five. How does FOMO form? A market that is too bearish can lead to a negative sentiment and a trade on the wrong side. This situation can lead to traders chasing higher-priced entries.
The positioning of bearish sentiment can have a significant impact on its behavior. Bulls are either short or have already sold. Not because Bitcoin is at new and terrible lows, like Black Thursday, but sentiment has become so bearish. It has taken nearly twice as long for anything to happen than it took for sentiment to bearish.
A sideways stab is more painful than a sharp correction| Source: BTCUSD on TradingView.com
If Black Thursday, put in the “sharp” wave two bottom, then the market could be painfully moving “sideways” in wave four per Elliott Wave’s law of alternation. BTCUSD fell more than 70% in March 2020, but it took only 250 days. Wave three’s intra-cycle peaks of the RSI indicate a wave four bottom, which would be roughly at the exact same price it was 14 month ago.
Even though investors haven’t lost anything in value since then, there is the cost of their time. The correction was not only a sideways one, but it has taken over 460 days to largely go nowhere. It took just 370 days for the bear market to finally capitulate. In a world where instant gratification is commonplace, Bitcoin was expected to already be more than $100K, a war is waging, an economic crisis is looming, and more — no wonder why the masses are so bearish on Bitcoin.
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But what if they’re wrong, and wave five remains? This theory is shared by contrarian David Hunter, who reminds us that a “bull market climbs a wall of worry.” Hunter has made chilling calls in the past, and is expecting a “once-in-a-generation melt up” to ensue any day now, based on little more then the bearish sentiment.
After all the sideways trading, it is thought that the market has become too expensive in the downside. Instead, the market moves to the upside with a sudden roar. Wave five will end and everyone will be caught off guard by the bearish market price movements that caused all the negative sentiment.
“Bear markets slide down a slope of hope.”
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Featured Image from iStockPhoto. Charts from TradingView.com