11 Apr 2023

A reliable pattern or an illusory correlation?

BTC’s current drawdown and recovery cycle is remarkably similar to the pattern seen in the 2018-19 bear market in terms of length and trajectory. Let's look at some clues from the past.
BTC Drawdowns
Source: Tradingview


  • If history repeats BTC will peak around May 20 at $45,000
  • Current BTC price cycle remarkable similar to previous cycles
  • Committed long-term holders are still unwilling to sell at 60% drawdown
  • The early 2023 rally has all the hallmarks of a hated rally
While no one should expect a 1:1 mirroring of the current drawdown to previous drawdowns, the resemblance to the 2018 drawdown is staggering. The two drawdowns are similar in terms of duration from peak to trough, and the recovery trajectory. The peak-to-trough drawdown was more severe in 2018 at 84% versus 78% in 2022, but apart from that, similarities are eye-catching. Bottoms in both cycles lasted for approximately 370 days. And the peak-to-trough return after 510 days of both cycles reached 60%. In 2018, the bear market rally topped 556 days after the 2017 peak, on June 29, 2019, with a 34% drawdown from the peak. While history is far from likely to repeat in a similar fashion if the fractal were to continue – BTC would peak around May 20 at $45,000.
A result of long-term holders and a sense of underexposure
A satisfying explanation behind the resemblance is hard to put forward, but a pragmatic understanding of the typical BTC holder may help. Committed long-term holders are still unwilling to sell at a 60% drawdown from the previous peak and use these periods as accumulation periods. Additionally, the early 2023 rally has all the hallmarks of a hated rally - a rally where holders feel underexposed after a highly traumatic year, where investors de-risked in anticipation of further downside. The hated rally of 2019 ended with a significant blow-off top before BTC resumed trading at a 40-60% drawdown from its 2017 ATH.
BTC recovery from bottom
Source: Tradingview
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