The Bitcoin Layer

The Bitcoin Layer

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The Bitcoin Layer
The Bitcoin Layer
The Bear Market Bottoming Range: Bitcoin Chart Pack

The Bear Market Bottoming Range: Bitcoin Chart Pack

In this long and soul-crushing consolidation, bitcoin's fair value is being set in the $17,000 - $22,000 range.

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Nik Bhatia
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Joe Consorti
Sep 23, 2022
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The Bitcoin Layer
The Bitcoin Layer
The Bear Market Bottoming Range: Bitcoin Chart Pack
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Dear readers,

Echoes of the 2019 bear market abound. As a relatively new asset class, bitcoin discovers its market value through cycles. After months of consolidation, the market has voted $17,000 - $22,000 as the bottom fair-value range for this bitcoin market cycle.

As we chop around the lows and coins are reshuffled from unsure hands to stronger, less prone-to-sell buyers, a bottom price range is formed, teeing up the market for the next bull run, whenever that may be.


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Price study signals the bottom price range

Bitcoin is undervalued, mirroring the price action of two past market cycle drawdowns.

We first look at MVRV—the ratio of bitcoin’s price to the average purchase price of the network—telling us if bitcoin is overbought or oversold, relative to its cost basis. Currently, bitcoin is oversold relative to the average purchase price of the network.

The last time policy rates were elevated and risk markets were falling, the Fed paused hiking rates (labeled in red), and bitcoin stopped declining and started basing:

The Fed’s last hike cycle occurred during 2018 and 2019—look at Fed Funds in orange on the bottom pane. Bitcoin’s MVRV was positive but falling as the Fed hiked rates. Just before the Fed paused, bitcoin fell off a cliff and found support around its realized price. Once the Fed paused after cracks started forming in the real economy, the price rebounded within 5 months. We’re witnessing this exact same dynamic play out today.

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