Bitcoin (BTCUSD) is on the verge of establishing an LMACD Bearish Cross on the 1M time-frame, which for better reliability needs to close the current 1M candle (October) to confirm it.
The nightmare LMACD Bearish Cross
As the title says, this is a 'nightmare' development for the market, certainly not something that the majority of investors want to see right now, as this Bearish Cross has had disastrous effects every time it took place at the end of the 4-year Cycle.
First of all, let's not allow being overlooked the fact that the 1M LMACD is also reversing right before a test of its multi-year Lower Highs trend-line. That line priced all previous Cycle Tops.
Is this a Cycle Top? Best-worst case scenarios
Back to he Bearish Cross, it has always been formed around Cycle Tops as well. More specifically, the one that was formed after January 2014, was already on the 3rd month after the Cycle Top. The one that was formed after February 2018, was on the 4th month of the Bear Cycle. More recently, the one that was formed on August 2021 was 3 months before the Cycle Top. Interestingly enough, that was a peculiar Cycle with an (almost) Double Top, which was no surprise that the LMACD got rejected on its Lower Highs trend-line much earlier on the April 2021 Top.
As a result, the best case scenario based on this model for BTC is to have another 3 months of Bull, especially if it gets aided by favorable news (Trade deal, rate cuts, adoption). The more likely however historically, especially if October closes in red in 10 days, is that Bitcoin has entered a new Bear Cycle and this MACD Bearish Cross comes to confirm it.
How low can it go??
What's even worse is that, if we've already seen the Top, the market tends to decline on average by more than -80% historically, with the last Bear Cycle suffering losses of almost -78% (the softest Cycle of all). It was also the only one that closed a month (numerous 1M candles actually) below the 1M MA50 (blue trend-line) unlike the first two, which used that as a Support/ Cycle Bottom. As a result, the best case scenario if a new Bear Cycle has already started is to place a bottom on its 1M MA50 around $60000 - 65000 and the worst to decline by -78% around $30000 (or a little worse).
Again, not the kind of technical analysis most want to be seeing right now..
The positive look
For conclusion, we should always keep in mind that the fundamental scenery/ environment changes with every Cycle in a more favorable way, e.g this Cycle we had much stronger institutional adoption, even national treasuries and more importantly we saw the introduction of the Bitcoin ETF by Blackrock which was a game changer in capital inflows. You don't see often such investment bank giants 'allowing' one of their products to tank by -80%.
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