2022 was a really rough year for Bitcoin. That’s how it felt. In reality, however, it was the first 6 months that were rough. Since mid-June, the price of Bitcoin went up some 30% (daily closing basis) and is currently only marginally below its June lows. Interestingly, other tokens like Ethereum are in a much better spot. This trendless state is a good thing as it should be the driver of our crypto predictions, it is not a bad thing, here is why.
As a guiding principle, any market can only turn bullish once it arrives in a trendless state. We define ‘trendless state’ as a period of a few months (at a bare minimum) in which volatility is unusually low.
Why is a trendless state a good thing?
That’s because the market is in a state without tension. Stated differently, whenever there is tension there is less energy to develop a trend. Tension might create volatility, but that’s not a trend per se, certainly not a bullish trend.
If we look back at October of 2020 or March of 2019, there was a period of at least one month in which BTC was trendless. A few months later, BTC was trading 3x higher.
The current BTC chart starts looking good. It is not ready to take off, certainly not, but if volatility remains low and if recent lows are respected, we could vividly see a bullish trend develop in the first quarter of 2023.
ETH looks even better, frankly.
Volatility is not high, ETH is printing a higher low against June (more constructive chart setup compared to BTC), we can easily see a bullish reversal structure on this chart.
If both BTC and ETH, as leading indicators of the crypto space, continue to respect their recent lows AND remain trendless, we will turn very bullish on crypto in 2023. After the FTX drama, however, we believe it is imperative and more important than ever to be very selective when picking tokens to buy / hold. This will be the key theme in our crypto investing research service.