Past Precedents, Cross-asset Volatility, and On-chain Metrics Suggest That Bitcoin Is Likely to Bottom Out Between November and December 2022

Rohail Saleem

This is not investment advice. The author has no position in any of the stocks mentioned. has a disclosure and ethics policy.

The proverbial stars appear to be finally aligning for the world’s largest cryptocurrency by market capitalization as historical precedents, cross-asset volatility, and key on-chain metrics suggest that Bitcoin’s bottom is nigh at hand.

Evidence 1: Bitcoin Has Historically Bottomed Out Between 413 and 364 Days After Having Formed a New All-time High

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Bitcoin was able to carve out a bottom 413 days after reaching a zenith back in 2013. In 2017, this process took 364 days. Based on these two data points, we can conclude that Bitcoin is likely to bottom out between the 09th of November and the 28th of December 2022. Notice that there is a decreasing trend between these two data points, where the bottom in 2017 came 48 days earlier than the one in 2013. If the same held true this time around as well, Bitcoin should have bottomed out within 317 days of the 10th of November 2021, when the cryptocurrency had formed its latest all-time high. However, this has not occurred. Nonetheless, this is a very powerful analog that grows even more potent when viewed in relation to other evolving metrics.

Evidence 2: The World’s Largest Cryptocurrency by Market Capitalization Currently Has Lower Volatility Than the Dow Jones Industrial Index

We have been consistently hammering home Bitcoin’s elevated correlation with high-beta US equities. This regime poses sizable risks to Bitcoin’s status as a macroeconomic hedge. It also suggests that the cryptocurrency will not be able to exit its current bear market when equities continue to suffer under the proverbial hammer of the Federal Reserve – a situation that places Bitcoin under the thumb of the apex monetary institution.

However, Bitcoin is currently less volatile than the benchmark Dow Jones Industrial index, based on the 10-day realized volatility metric. It also proved to be less volatile than the British Pound Sterling for a brief period of time last month.

Additionally, Bitcoin was one of the best-performing assets in Q3 2022, having registered a gain of 3.1 percent during the period. For reference, precious metals were up 1.3 percent and cash only 0.2 percent during the quarter.

This relative outperformance indicates renewed intrinsic strength and is exactly what Bitcoin’s bulls require to exit the current perfidious regime, where the US 10-year yield drives short-term momentum in US equities, which in turn dictate Bitcoin’s price direction.

Evidence 3: A Key On-chain Metric Just Hit a New All-time Low, Indicating Capitulatory Conditions

The shorter-term supply of Bitcoin is currently at an all-time low, with 22 percent of the supply having remained stationary for 6 months now. This suggests capitulatory conditions and again strengthens the argument that a cyclical bottom for Bitcoin is nearby.

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