August Market Analysis
Happy Monday!
The month of August has given us more decisive action in the crypto markets than did June or July. While Bitcoin spent the past couple months ranging between the major areas of $30K and $40K, August saw a decisive breakout above the $40-$42K range (which I discussed in detail during June and July) which has since carried BTC back up to $50K.
Ethereum has show similar strength, breaking through $3,000 and now consolidating just above.
Rather than focus on the immediate price levels, I like to dig a bit deeper in these analyses and look at the long-range and historical implications of the market’s recent price action.
The crypto market(s) move in cycles. Traditionally, these cycles have been around 4 years long each time – that is, two years or so of “bull market” (positive) price appreciation, followed by around two years of “bear market” (negative) price decline. This cycle has been easily identifiable over the past several years, 2011 – 2013 saw a sharp increase in price, followed by a decline from 2013 – 2015. The next major price expansion occurred from 2016 – 2017, resulting in the late 2017 top at ~$20,000 for BTC. This in turn was followed by a sharp decline from 2018 – 2019 (even reaching into 2020, perhaps in part thanks to Covid-19’s impact).
We are now in the midst of Bitcoin’s (and the rest of crypto’s) third major bullish cycle. Many were worried this cycle would come to a premature end after the major correction in May… but as my readers know, I was quite unconvinced of this.
The sharp correction in May caught many (including me) by surprise, but it is not without historical precedence - even in the midst of an expansionary cycle.
I would like to draw your attention to a corollary from over 8 years ago, when the crypto market was quite young indeed. After all history may not always repeat itself, but it often rhymes. I think this is as true in markets as it is in everyday life.
During the 2013 Bull Cycle, Bitcoin experienced two major rallies, separated by one major decline. The red line represents the 20-week price average
Take a look at the chart above. In April 2013, Bitcoin had just made a new high at $259.60(!), capping an incredible run from just $13 a short 3 months earlier. However, from April – July of 2013, Bitcoin experience a sharp correction/decline, at one point falling over 75% from the high set in April, to a local low of around $60 by the end of June.
Many thought the bull market (and, by extension, crypto itself) was dead. However, as you can see from the above chart, the decline ended right there. Bitcoin climbed steadily, re-took its 20-week moving average (the red line), and then exploded higher than anyone though possible, peaking later in the year at over $1,100.
Eight years later (almost exactly), it’s possible we may be in a similar situation. The decline from May – July has ended. Over the last couple of weeks Bitcoin has rallied back to once again re-take its 20-week moving average. Are we setting the stage for another record-setting run?
The above chart represents recent price action for BTC. Having just re-crossed the 20 week price average (red line), could we be set for a similar move to 2013?
The truth is (of course) that I do not know! But I wanted to make you aware of the possibility – and the fact that it would not be without precedent in Bitcoin’s short yet eventful history.
The technical picture for Ethereum looks perhaps even more promising than Bitcoin. In the long-term chart below, notice that Ethereum very quickly recovered above it’s own 20-week moving average, and that unlike Bitcoin, this critical average never turned down.
Since re-testing its previous all-time high level of ~$1,400 in February (an event of some significance I pointed out to readers at the time). Ethereum has been looking especially resolute. The network has now burned over 133,000 Ether since the EIP-1559 upgrade went live earlier this month.
Crypto News:
FTX Signs $17.5M Deal to Sponsor UC-Berkeley Athletic Department, to be paid in crypto (LEARN MORE)
Facebook Considering NFT Support in Novi Digital Wallet (LEARN MORE)
Some Filipino Merchants Prefer Payment in Axie’s SLP (LEARN MORE)
CFTC Commissioner Stump Decries 'Oversimplification' That Crypto Is Either a Security or Commodity (LEARN MORE)
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Have a great week!
Shahar
This newsletter is meant for informational purposes only. It is not meant to serve as financial advice. If you are interested in financial advice, please schedule a personal consultation with me, and be sure to read the accompanying disclaimer.
