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Mark Twain said that history doesn’t repeat, but it often rhymes. Such a scenario could be about to play out in Bitcoin, according to a potential fractal that mimics the setup before a previous record-breaking rally.
While the conditions aren’t quite the same for an exact repeat, there could be enough for the price action now and then to rhyme just enough. Let’s take a closer look.
Record-Breaking Bitcoin Price Fractal Found, But Is It Valid?
Markets are cyclical and patterns repeat in those markets so often, they can be used to predict the future. Most of the statistically proven technical patterns include some type of geometric shape such as triangles and rectangles.
But not all setups are so clear. Repeating patterns called fractals can appear, mimicking the price action of past moments. When fractals appear, they aren’t a perfect repeat of the situation before, but can yield similar results.
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The fractal in question is a setup from October 25, 2019 – in the past dubbed the “Xi pump” or “China pump.” Bitcoin price had swept support after more than a month of grinding against it, only to sharply reverse.
Not only did price action reverse, the resulting short squeeze and FOMO led to a record-breaking 44% climb in a matter of 48 to 72 hours. It was the third-largest single-day rise in the cryptocurrency’s history.
Price action mimics a fractal from October 2019 | Source: BTCUSD on TradingView.com
Will The Death Cross Breathe New Life Into Crypto Bulls?
The fractal above is eerily similar to the price action during the October 2019 downtrend. The peaks and troughs match well enough, as pictured above.
What is more potentially telling, is the fact the same setup is brewing when Bollinger Bands are turned on. 12-hour BTCUSD timeframes show a similar pattern, then a very similar close outside of the lower Bollinger Band. After a pause and a pair of doji, Bitcoin price reversed and reversed hard.
The Bollinger Bands could snap BTC back to $60K | Source: BTCUSD on TradingView.com
If the pattern were to repeat or even rhyme, there is potential for a historic, record-breaking reversal. The last time the setup happened in October 2019, there was a 44% climb in the days that followed.
Related Reading | 2022: The Year The Secular Bitcoin Bull Run Could End
Another 44% climb would take Bitcoin back above $61,000 per coin and it could happen in just days. Fractals, however, aren’t valid, statistically proven patterns with any probability behind them. They simply can appear to look like past price action, but completely fail to yield the same results.
Could Bitcoin pump into the death cross again? | Source: BTCUSD on TradingView.com
Finally, there is a looming “death cross” on the daily, which also appeared around the same time as the so-called China pump. A death cross happens when the a short-term moving average – the 50-day MA – crosses below a long-term moving average – the 200-day MA.
Despite all the similarities, the fractal above should be taken with a grain of salt – salt that may end up in the wounds of bears should this pattern play out.
Follow @TonySpilotroBTC on Twitter or join the TonyTradesBTC Telegram for exclusive daily market insights and technical analysis education. Please note: Content is educational and should not be considered investment advice.
Featured image from iStockPhoto, Charts from TradingView.com