Updated: May 14
Happy Thursday everyone! Well, it finally happened, bitcoin has finally had a correction reminiscent of the 2017 bull market. This is the first time that bitcoin has touched the weekly 21 EMA since September 7th, 2020, which shows just how strong this bull market has been. During the 2017 bull market, there were at least six corrections that ranged anywhere from 30% to 41%, with some of them occurring very late in the cycle. All of these corrections resulted in bitcoin coming in contact with the weekly 21 EMA, however, bitcoin never closed below it.
Bitcoin Weekly Chart - 2017 Bull Market
What this shows is just how volatile bitcoin can be even in a bull market. It also answered a question I had about whether the much higher institutional involvement with bitcoin in this bull market would mute the corrections. As we found out yesterday, it looks like it had no effect, and bitcoin will just do what bitcoin does best, scare the crap out of investors.
Bitcoin Weekly Chart
Looking at the current weekly chart we can see that the biggest difference between this correction and the 2017 corrections is that this one happened during a consolidation phase while the 2017 corrections occurred after bitcoin had surged higher. As of right now, I'm not sure if there might be some significance to this or none at all. I really don't expect a quick recovery from this correction, I feel like bitcoin may linger near the bottom side of the consolidation pattern for a while. The main thing that I will be watching for is that bitcoin doesn't close below the weekly 21 EMA.
Also, we can't assume that bitcoin from here is just going to recover from this correction and move back up near the all-time high. There is always a chance that this correction could continue and deepen. If that did happen I would consider that a big change of behavior and have to reassess where I think this market is headed. Although I don't believe that bitcoin has peaked for this bull market we can clearly see that bitcoin has made at least a short-term top. The possibility exists that maybe bitcoin has peaked for this bull market, I personally believe that the chances of that are pretty small but we shouldn't write that possibility off completely.
Bitcoin Weekly Chart - 2013 Bull Market
There is also the possibility that we could see a bull market similar to the 2013 bull market. During the 2013 bull market, there was a short-term peak around the beginning of April followed by a 77% correction. During that correction, bitcoin did close below the weekly 21 EMA a couple of times but did eventually recover to finally peak at over 1700% above the lows of the correction.
If we do see bitcoin close below the weekly 21 EMA I will watch to see how it responds, does it start to recover quickly or struggle and continue to drift lower? If bitcoin did struggle I would not want it to drop too far below the weekly 21 EMA, and I certainly would not want it to drop down to the weekly 50 EMA. There is pretty strong support ranging from about $39k up to $41K and if that did not hold I would then have to seriously question this bull market.
Bitcoin 4-hour Chart
As you can imagine the rest of the crypto market doesn't look much better and some of it worse. I still believe overall that the bull market is still intact, it's possible that this is just what bitcoin needed to reset after such a crazy run-up from the 2017 all-time high. Maybe, once bitcoin bottoms we will see it take back the lead in this market and surge to new highs.