Technical strategist Tom DeMark said in March that bitcoin could fall as low as $18,418 – back when the cryptocurrency was trading as low as $48,000.
A volatile weekend had bitcoin BTCUSD,
was momentarily trading below $18,000, while trading around $20,000 on Monday, down about 70% from its Nov. 10 high of $68,924. The value of bitcoin crashed when the Federal Reserve started raising interest rates.
DeMark’s indicators agree that it is very important to the number of days, which do not have to be consecutive, that there will have been a close lower than the close two days ago. Subject to various conditions, when the countdown reaches 13, a buy signal is applied. (The reverse applies to sell signals.) Put simply, his analysis looks for both overbought and oversold signals.
In an analysis provided exclusively to MarketWatch, DeMark claims that lasting damage has been suffered because bitcoin has fallen more than 50% from its peak. In previous declines, bitcoin has held the 50% retracement levels.
See the previous story: Technician who called 2020 market bottom says ‘shocking rally’ is in store
“Typically, painful long-term damage is done to an uptrend when a retracement exceeds 56%,” says DeMark, founder and CEO of DeMark Analytics and consultant to hedge fund manager Steven A. Cohen. “Such outages indicate that it will take many years, if not decades, to reach all-time highs for bitcoin with high probability.”
For comparison, it took 25 years for stocks to break through the peak of September 1929.
But like the stock market after 1929, there could be a rally. “That doesn’t negate the prospect of a recovery of up to 50-56% over the next few months, implying bitcoin’s return to $40,000-$45,000.”
Depending on the timing model applied, bitcoin is recorded on the 12 or 13 buy countdown on Saturday morning. “Since this was accomplished on a weekend and 7-day chart, there remains a modest risk of two lows and closes below Saturday’s levels next week. It doesn’t matter once there is a close above the close 4 days ahead of the next trading day with a higher high and a higher close, the trend should reverse higher,” he says.