What Can We Conclude from the Recent Bitcoin Rally?

Bitcoin looks as though it might be at a turning point. Last November, the cryptocurrency reached a low of US $15,476 (£12,519). Right now, it is trading at US $23,000 – which represents a Bitcoin rally of some 53%.

After a year of stagnation and tumbling values, this news will come as music to the ears of many crypto investors. A lot of people are pointing to the price increases and calling this the end of the dreaded “crypto winter.”

But Bitcoin still has a long way to go before it regains its lofty peak from November 2021, when its price reached a whopping US $70,000. Nevertheless, thanks to this recent positive momentum, a lot of crypto enthusiasts are already expressing optimism for the year ahead. But exactly how realistic is that?

The Perils of Trying to Predict Bitcoin

There are no hard and fast rules when it comes to predicting the crypto markets. If there were, we would all be billionaires by now. Nevertheless, analysts tend to make their future predictions based on the patterns of the past; and while the new industry of cryptocurrencies may not have any direct point of historical comparison, we can still analyse parallel trends in other markets and investments.

For example, let’s take a look at the dot-com crisis that occurred in 2000-2002. Bitcoin’s pattern of value leading up to its peak in November 2021 and its subsequent drop-off in 2022 shows a similar trajectory to how the dot-com bubble burst. In both cases, after losing their peak value, the markets slumped into a series of smaller peaks, what is sometimes referred to as “lower highs.

Although these may have looked like positive developments at the time, ultimately, none of these new bursts of value was able to sustain or match the previous peak – and for all their moments of optimism, these lower highs ultimately came together to form a gradually descending pattern of value.

This is what is sometimes known as an Elliott Wave. The phenomenon was named after Ralph Nelson Elliott, an American financial analyst and stock-market expert. The wave describes the period of time following a record high, when investors still have some optimism even though net value is stuck in a gradual decline. Those lower highs represent moments of hope, in between troughs of disappointment, as investors keep trying in vain to pump more into the system in the hopes of kickstarting it again.

Inevitably though, in an Elliott Wave, there comes a point known as “capitulation”: this is the moment when investors eventually despair and give up, deciding that the market will never again return to its former highs, and it is characterised by a wave of mass selling as the profit line begins to plummet into a nosedive.

Decrypting the Wealth Transfer

Another way that market analysts tend to look at value and the transfer of wealth is by establishing exactly who currently holds it. While cryptocurrencies like Bitcoin can deliver some degree of user anonymity thanks to their blockchain technology, there are still some clues we can use to establish market trends. For example, analysts will often look at the size of wallets and compare the buying and selling behaviour of wallets containing one Bitcoin upwards against wallets containing 1000 Bitcoins upwards and those containing 10,000 upwards.

What we have seen in the last year with Bitcoin – particularly since last November, when the scandal with FTX led to the second-largest crypto exchange collapse – is that those smaller wallets are doing most of the buying at the moment. In fact, there are currently more wallets containing at least one Bitcoin now than there have been at any other previous time. However, when we look at those “whales,” we see that some of the really big investors have been selling off their stock lately… which suggests these more seasoned investors might be anticipating more uncertainty ahead.

How to Secure Your Crypto Investments

There is only really one way to prepare for uncertainty. While you may not be able to create a strategy for dealing with unknown circumstances, you can at least focus on your own security instead. While there are many reasons to remain optimistic for the future of Bitcoin and other cryptos, these are, without doubt, uncertain times, and it would be very wise to use this time to make sure you’re fully equipped for the road ahead.

That means getting yourself kitted out with the best possible crypto wallet to suit your personal investment style – and you should also consider which crypto platforms you’re using. When it comes to the latter, it’s always worth listening to the experts who’ve been involved in the industry longer than most. In recent months, we’ve seen an increasing number of cryptocurrency analysts recommending popular platforms  for investors of all experience levels seeking a reliable platform to securely trade hundreds of different decentralised assets.

Where is Bitcoin Heading?

When we look at the current trends in Bitcoin value and we analyse exactly who is buying and selling Bitcoin at the moment, we see a pattern that suggests there may be more uncertainty to come – the crypto industry isn’t quite out of the woods yet.

From here, there are two potential futures for crypto. In the first case – it collapses, implodes, the whole crypto industry falls in on itself and ceases to exist, proving correct all those critics who said all along that the whole thing was just a “fad.” Needless to say, if we believed that was true, then we wouldn’t be here talking to you now.

The other, more realistic scenario is this: the value of Bitcoin continues to fluctuate and show alternating periods of rise and fall until it eventually stabilises. Even when traditional investment stocks see periods of rapid decline, they always eventually stabilise when they reach a bottom line. At that point, when they’re at their lowest, that’s when those big investors typically develop a taste for them again.  People rush to buy back in once the asset appears to be at its lowest price, and in doing so they push the value up and suddenly, we’re back in business again.

So the only real question for Bitcoin right now, is have we reached that bottom value yet? Or, do the gains we’ve seen since November represent the “lower highs” of an Elliot Wave, meaning that the value has still further yet to descend before the market really gets back into gear?

There wouldn’t be any gains to make in crypto if there wasn’t also some risk. You should also always keep in mind the golden rule that you never invest more than you can comfortably afford to lose. However, a lot of crypto experts are quietly confident, at the moment, that the sustained growth we’ve been seeing over the last few months is more than just a flutter and actually represents the beginning of a whole new phase in the lifecycle of crypto. Whatever the case may be, we’re certainly feeling optimistic at the moment – and we’ve got a feeling that it’s going to be an interesting year ahead of us for Bitcoin.

Disclaimer & Declaration of Interest
The information, investment views and recommendations in this article are provided for general information purposes only. Nothing in this article should be construed as a solicitation to buy or sell any financial product relating to any companies under discussion or to engage in or refrain from doing so or engaging in any other transaction. Any opinions or comments are made to the best of the knowledge and belief of the writer but no responsibility is accepted for actions based on such opinions or comments. The writer may or may not hold investments in the companies under discussion

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