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Analysis of previous Bitcoin bottoms suggests more pain to come

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Market Analyst at Bitcoin Magazine Sam Rule, tweeted a comparison chart of bitcoin returns over the last four significant peaks. The most recent timeline reflecting our current situation suggests that more shortcomings lie ahead of us.

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The chart includes the 2011 period, which ended after 160 days and a 93% drawdown; the period 2013-2015, which ended after 410 days and an 85% drawdown; and the period 2017-2018, which ended after 360 days and an 83% drawdown.

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The current 2021-2022 period is 220 days, which is 69% less than the November 2021 peak so far.

Bitcoin returns after peak
Source: @samjrule on

Analysis of past Bitcoin drawdowns

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Previous percentage drawdowns fluctuate between -93% and -83%, suggesting that the current “live” drawdown of -69% must fall further before bottoming out.

When examining percentage drops sequentially, it was noted that each period had progressively less severe declines. If the same pattern repeats this time, it could result in a drawdown of around -80%. This will cause bitcoin to hit a floor near $13,800.

Moreover, the model above suggests that BTC becomes less volatile over time.

In terms of the length of each drawdown period, the longest period was the 2013-2015 phase of 410 days. But no discernible pattern can be extracted from the data.

Remember that the past event should not be taken as an indicator of future results. Moreover, this method of analysis does not take into account the macroeconomic landscape, which is a factor in the current 2021-2022 period.

macro picture

The mainstream media is reporting a mixed picture regarding recession risk.

For example, CNBC A commentary by Simon Baptist, chief economist at the Economist Intelligence Unit, was recently published. Baptist downplays the risk of an imminent recession. Instead, he said, the likely result is stagflation, characterized by rising costs coupled with a slowdown in economic growth.

I also talk to CNBC Recently, Larry Davis, a former chief economist with the SEC, made the case for a coming recession by saying that inflation is hard to stop. [by raising interest rates] without going into recession.

“The day of reckoning will come, the question is how soon.”

Meanwhile, Lenore Hawkinsmanaging partner at Calit Advisors, said consumer spending suggests that a recession may have already begun.

β€œThis is worse than what we saw in the 70s, in the real estate crisis in the 80s, and even in the September 11 attacks and the financial crisis in 2008 – even they were not as hard on the consumer as what we are seeing. today. “.

Decrease in household income usually leads to the fact that spending is given preference to basic necessities. As such, demand for bitcoin and other non-essential commodities is likely to decline.

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