Bitcoin Fractal Analysis: We May See These Bottoms Before The Year Is Over!

According to analysts, Bitcoin (BTC) accumulation in the 2022 bear market looks stronger than in 2018. But it is possible that macro winds will ruin the party this time. Bitcoin investors don’t see the US midterm elections as a major event, according to crypto analyst Yashu Gola, but a spooky fractal from 2018 provides a clue as to what could happen before the year ends. We have prepared Yashu Gola’s market readings and analysis for our readers.

Will Bitcoin go to 12-14 thousand dollars after the midterm elections?

Comparing Bitcoin’s price action prior to the 2018 midterm elections to those in 2022 shows a strikingly similar bear market trend. For example, as you follow on Kriptokoin.com, BTC trended lower in 2018. However, it retained a horizontal level near $6,000 as support. However, after the by-elections, it fell below that.

BTC daily price chart showing the 2018 trend. Source: TradingView/Aditya Siddhartha Roy

In 2022, the cryptocurrency reflected this trend by half. Its price is currently at the current horizontal support level of around $19,000. With the by-elections scheduled for November 8, it is possible that this collapse scenario will happen sooner or later, as illustrated below.

BTC daily price chart showing the 2022 trend. Source: TradingView/Aditya Siddhartha Roy

Independent market analyst Aditya Siddhartha Roy says that if a similar breakdown occurs, the Bitcoin price will fall to the $12,000 – $14,000 range. He also notes that BTC will likely bottom out in November or December 2022, as it did in 2018.

Stock market alerts for bitcoin

Bitcoin’s correlation with US equities has strengthened after the Fed’s tightening monetary policies. Hence, the bearish forecast for BTC emerges. During the Fed’s rate hikes in 2022, both markets witnessed sharp declines. Historically, in 17 of the 19 by-elections since 1946, the stock market has outperformed in the six months following the election.

Average performance of the S&P 500 during the US midterm elections / Source: Charles Schwab

Liz Ann Sonders, chief investment strategist at Charles Schwab, says this is mainly due to the market’s expectations for higher government spending from a new Congress. She also states that she argues that 2022 may bring a different result. In this context, the analyst makes the following statement:

An additional infusion of funds is unlikely this year, given the government’s historic levels of spending and incentives in response to the pandemic. The combination of high inflation, the war in Ukraine, and an ongoing pandemic has already made this cycle unlike previous interim years. With so many other forces on the market, I wouldn’t put too much weight on historical interim performance.

US money supply remains above $21 trillion / Source: FRED

As a result, Bitcoin remains at risk of trailing US equities and falling to $12,000 – $14,000.

Optimistic BTC price indicators

However, some of the crypto market predicts that Bitcoin will break away from the traditional markets. So he suggests that BTC will not crash with the S&P 500 after a midterm election. Stephane Ouellette, CEO of FRNT Financial Inc, says:

At some point, the market will be controlled by the community that believes in BTC long-term and is very unlikely to sell, and the growing global community that uses BTC for trading.

Meanwhile, the daily correlation coefficient between Bitcoin and the S&P 500 dropped to a four-month low of 0.08 on Oct. Ouellette’s statement followed.

BTC and SPX daily correlation coefficient in recent days / Source: TradingView

Meanwhile, the number of unique addresses with at least 1 BTC hit a new record high on October 17, contrary to the trends seen in the 2018 bear market. This shows that investors are accumulating Bitcoin during local price drops.

Number of Bitcoin addresses holding at least 1 BTC / Source: Glassnode

Crypto exchange Bitfinex said, “On-chain data shows that these holders are optimistic that the market will recover. It also points to keeping market fundamentals relatively healthy,” he says.

Market analyst Wolf provides a similar outlook, citing Bitcoin’s oversold relative strength index (RSI) and Moving Average Convergence Divergence (MACD) indicators on the weekly charts for 2022. This technically points to a period of accumulation in the future. The analyst shares the following assessment:

It is ridiculous to compare the existing structure before the capitulation with 2018. It’s remarkable just looking at the weekly RSI and MACD differences. In 2018, the RSI is fluctuating in a mid-range of 45 seconds. In 2022, the RSI hit its lowest level ever.

In contrast, these oscillators were in neutral territory before the 2018 midterm elections. This means that the price of BTC has more room to fall.