Did Bitcoin Form an Important Top on 26 June @ 13,844?
Cryptocurrencies suffered a brutal bear market in 2018. In fact, it was the worst crypto bear market since Satoshi Nakamoto unveiled Bitcoin (BTC) in 2009. The vast majority of coins and tokens lost 70-90% of their value during the 2018 collapse. However, in mid-December 2018, the crypto bear finally made an important bottom. As we slowly transitioned into 2019, coins and tokens began to stabilize and start to move higher. The leader of the group was Bitcoin.
For the first six months of 2019, BTC enjoyed a substantial rally. The digital currency increased by 231.4% from January through June. The peak occurred on 26th June @ 13,844.
In percentage terms, the peak was 275.9%.
Bitcoin was not the only big mover during the first half of 2019. Several coins and tokens participated in the big rally. However, during the past six weeks, the crypto rally has begun to fade. Is this the beginning of a substantial decline or is this nothing more than a brief pullback in a bull market? Let’s examine the details.
The Bitcoin Chart Pattern is Very Close to Turning Bearish
In January, BTC needed to penetrate five major resistance levels in order to flip the chart pattern from bearish to bullish. All five price levels were easily exceeded in April and May.
- 4,440 – 2nd April
- 5,704 – 3rd May
- 6,568 – 13th May
- 8,485 – 27th May
- 9,966 – 24th June
As you can see, all the price levels were penetrated over a period of 10 weeks. Bitcoin enjoyed a very bullish time period in April, May and June. Check out BTC chart number 1 below:
Bitcoin blasted through the final resistance level @ 9,966 on 24th June. Two days later, BTC was trading @ 13,844. The rally abruptly ended on 26th June. During the past four weeks, Bitcoin has struggled to maintain its momentum. At least for now, the BTC rally has stalled out.
During the past 10 days, Bitcoin has struggled to stay above 9,966. This is not a good sign for BTC. The cryptocurrency appears to be running out of momentum.
If Bitcoin generates a weekly close below 9,966 within the next few weeks, the price could easily tumble all the way down to 6,568. In order to maintain the bull market, BTC must stay above 9,966. See charts 2 and 3 below:
Bitcoin Investors Should Not Expect a Repeat of 2017
Now that Bitcoin has finally entered a new bullish phase, many BTC investors are expecting the cryptocurrency to repeat its performance from 2017. As you know, 2017 was an extremely bullish year for the entire cryptocurrency universe.
Regarding Bitcoin, the official rate of return in 2017 was 1,420.7%!
BTC has produced several spectacular annual returns since 2009. Therefore, many investors simply expect Bitcoin to achieve spectacular returns every year. Of course, these expectations are completely unrealistic. Let’s review Bitcoin’s annual return since 2010.
- 2010 222.2%
- 2011 1,344.8%
- 2012 220.8%
- 2013 5,586.5%
- 2014 58.8%
- 2015 35.6%
- 2016 123.4%
- 2017 1,420.7%
- 2018 74.6%
During the past nine years, BTC has generated an average annual return of 980%. This type of rapid advance is unsustainable. It’s impossible for an asset like Bitcoin to grow 980% year after year. Instead, the most likely scenario is for BTC to trade sideways for a number of years.
Bitcoin needs to consolidate its gains from the past decade before embarking on a new bull market.
Several prominent bulls within the cryptocurrency community have predicted that BTC will exceed $100,000 by the end of 2021. This type of advance seems rather unlikely. In order for Bitcoin to reach $100K by the end of 2021, the cryptocurrency must produce an annual return of 450% for the next two years. It’s certainly possible but not likely.
Where Is Bitcoin Headed for the Remainder of 2019?
As long as BTC stays above 9,966 on a weekly closing basis, the chart pattern will remain bullish. Therefore, at least for now, Bitcoin is bullish. If BTC experiences a Friday close below 9,966, the trend will turn bearish and BTC will be in a new short-term bear market.
If Bitcoin drops below 9,966, it could easily decline to 6,568. If you are bullish on Bitcoin, it’s critically important for the price to stay above 9,966.
Full Disclosure: I own BTC on the spot market, BTC futures and BTC exchange-traded notes.