​Key Indicators For The Bitcoin Bull Market

​Key Indicators For The Bitcoin Bull Market

As bitcoin pushes an 18-month high amid momentous developments in the crypto space, we look at whether there really are reasons for confidence.

It has been a turbulent time in the global markets, with significant volatility. There are widespread fears amid warnings of recession, geopolitical unrest, and persistent inflation.

With that in mind, what is the outlook for crypto in the coming months?

Markets are driven by emotion, and it can be hard to separate that fear (and greed) out from the underlying picture. None of what follows is financial advice, because we’re not in the business of making predictions. All we can do is look at the data and describe what we see. In doing so, hopefully we can help people make better choices by enabling them to engage more critically with what they hear from mainstream and crypto media outlets, and so-called ‘expert’ influencers.

Where Are We In The Crypto Market Cycle?

Without trying to make any forecasts for bitcoin’s future price action, we can say with confidence that the market is in an uptrend – and has been for over a year.

  • Bitcoin bottomed at $15,500 on 21 November, 2022, just over a year ago.
  • Price has more than doubled over the course of the year. In fact, it has added almost 150%, recently touching $38,000.
  • Structurally, the market has been making textbook higher highs, and higher lows.
  • Bitcoin is trading above the major moving averages, including the 200-day MA and 200-week MA – both key levels that traders watch.
  • Volumes are returning to the market following a period of unusual calm. On Deribit, the leading futures and options exchange, open interest (the amount of money in all contracts) recently hit an all-time high of $15 billion, indicating the return of more sophisticated investors.
  • The total crypto market cap broke above $1.3 trillion, a critical resistance line, following 18 months of consolidation below this level.

None of this is opinion, it’s just data. All of it points to the fact that bitcoin has been in a bull market for the past year, and that the entry of new money and new participants is accelerating.

It’s possible that the market could turn down, of course. Markets are inherently unpredictable, especially in the shorter term. But the fact that a year has passed since that low point makes it hard to argue a new low is going to come any time soon. As things stand, around 80% of bitcoin holders are in profit at $37,000, and 85% at $37,500.

The ‘Wall Of Worry’

Moving away from the technical indicators, there’s further cause for optimism in the way that bitcoin has responded to major negative headlines.

The ‘Wall of Worry’ is a useful term from investing that describes the way that traders remain anxious about potential problems ahead, even when the market itself appears healthy. Concerns may include geopolitical tensions, economic turbulence, political instability, or almost anything else.

The point of the wall of worry is that emotion can play a key role in keeping investors out of the market.

The past year has seen a slew of appalling news reports. Wars in Europe and the Middle East. The collapse of China’s property market. Fears of recession. Persistent inflation. Multiple crypto exchanges being hit with legal action by the SEC, CFTC, and even the DOJ.

None of these have prevented bitcoin from recovering and posting higher high after higher high. The health of the network is strong, with hashrate (a key measure of security) at an all-time high. There is always something to worry about, but – as legendary investor Bernard Baruch said – ‘the main purpose of the market is to make fools of as many people as possible.’ Short-sellers have repeatedly been proven wrong.

Bad News Is Good News

The past year has seen some seismic events in the crypto world, with exchanges bearing the brunt of it. This has accelerated in the past month. FTX collapsed at the end of 2022, and founder Sam Bankman-Fried has just been convicted of fraud. Coinbase has been targeted by the SEC for running an unregistered securities exchange. Bittrex, one of the oldest altcoin exchanges, is closing down following scrutiny from the SEC. Kraken has been hit with similar charges to Coinbase, plus the accusation that (like FTX) it put customer funds at risk by commingling them with its own business funds.

And then there is Binance.

The world’s largest crypto exchange was just handed a $4.3 billion fine by US authorities, following charges of money laundering and other crimes from the Department of Justice. Founder and CEO Changpeng ‘CZ’ Zhao was personally fined $50 million for violating the Bank Secrecy Act, which requires financial institutions to put measures in place to prevent terrorist financing and money laundering. CZ, who has stepped down as CEO, also faces up to 18 months in prison under the terms of his plea deal.

It sounds like disaster, but the crypto markets have taken it all in their stride. There’s a sense that all of this is part of a process of professionalising the crypto space, and setting the scene for a series of imminent ETF approvals.

As cycles trader Bob Loukas wrote, ‘Now that the final crypto scammer of the (2018-22) Cycle is prosecuted, it's time to legitimize the scamming.’ That’s arguably a harsh take, given all that CZ has done to further crypto adoption. But the point stands: the authorities have been cleaning house, preparing for the entry of big money in the form of BlackRock and other major financial institutions. With that comes the legitimisation of bitcoin as a mainstream asset.

There are few guarantees in life or investing, and especially not in crypto investing. But zoom out, and the events of the last year start to look a lot like a carefully planned and deliberately crafted path to a new phase in the history of crypto.


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