Assessing the chances of one last bear market rally for 2022

  • Bitcoin price continues to consolidate around $16,500, supported by a trend line.
  • Investors can expect bullish convergence to unfold when combined with upbeat metrics on the chain.
  • The bullish argument will be invalidated if the $15,550 support level reverses.

Bitcoin price is in a good position to spark another bear market rally from an upmarket perspective. This development, combined with the optimistic outlook seen in on-chain metrics, further strengthens the possibility of a happy ending through 2022.

Bitcoin price and potential plays

Bitcoin price is exhibiting a descending wedge formation on the three-day chart described using trendlines to connect with two lower highs and three lower lows. The third test of the lower trendline is still ongoing as BTC hovers around $16,500.

As mentioned in a previous article, the price of Bitcoin has made lower lows over the past five months, while the popular momentum indicator Relative Strength Index (RSI) has made higher lows. This nonconformity or “convergence” is a sign of budding bullish momentum and is indicative of a market reversal.

Therefore, investors can expect Bitcoin price to jump 17% and reach the highest volume trading level of 2022 at $19,011, also known as the Point of Control (POC).

With investors still reeling from the crashes of Luna, Three Arrows Capital and FTX, this outlook might seem hard to accept. But an even more bullish outlook could develop if the price of Bitcoin takes the POC to a support level.

This development could attract marginalized investors, causing a spike in buying pressure. Such a scenario could push BTC to face and break above the descending wedge trendline. This trend line connects the November 2021 and March 2022 levels.

Thus, a decisive close of the three-day candle above this block will signal a change in narrative and initiate a 54% rally to $32,191. The target for this breakout is obtained by measuring the distance between the first swing high and the swing low of the descending wedge and adding it to the breakout point at $20,560.

While the 17% move mentioned above might seem implausible to investors in this bear market, they shouldn’t be blindsided if the 54% recovery scenario were to occur.

BTC/USDT 1-day chart

Post-Thanksgiving on-chain landscape for BTC

Supporting this illustrative outlook for Bitcoin’s price is the 24-hour active address index, which surged to 1.15 million on Nov. 20. The last time this indicator reached 1.15 million was in May 2022. In the cryptocurrency industry, investors still interact with the Bitcoin blockchain and are very active.

24/7 active BTC addresses

24/7 active BTC addresses

Taken by itself, the Active Addresses metric means nothing, however, when combined with the Supply Distribution Indicator developed by Santiment, the two provide a more complete picture. The proverbial “whales” are showing strong signs of a strong accumulation after the Nov. 22 crash. Over the past three days, the combined balance of 100 to 10,000 BTC addresses has increased by approximately 60,000 BTC, indicating that these investors are clearly buying the dip.

Bitcoin Supply Distribution

Bitcoin Supply Distribution

Interestingly, the “buy the dip” keyword doesn’t have as much momentum on Nov. 22 that it did during the Nov. 10 crash. This decline in the social volume metric indicates that retail investors were scalded during the second dive on Nov. 22.

Combining this knowledge with the fact that accumulation is seen in whales holding 100 to 10,000 BTC, it can be assumed that it is a transfer of wealth from weak to strong hands and “smart money”.

Social Volume of Bitcoin

Social Volume of Bitcoin

To sum up, a year-end rally for the price of Bitcoin appears to be brewing. Whether it’s a 17% hike to $19,011 or an explosive move to $32,191, investors need to stay prepared.

On the other hand, if Bitcoin price fails to react to bullish indications and makes a three-day or weekly candlestick close below the $15,550 support level, it will invalidate the bullish outlook. This development will create a lower low, sowing fear in the minds of investors and triggering a selling frenzy.

In such a situation, investors can expect Bitcoin price to revisit the support area, moving from $13,575 to $11,898.


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