Bitcoin: Battle at the Bear Market Resistance Band

Bitcoin has recently rallied back to its bear market resistance band, a common occurrence in midterm years. Historically, Bitcoin struggles to hold this band as support during these periods, as seen in 2018 and 2014. While it's possible this time could be different, it's not the base case scenario. There's an argument that because the last top was based on apathy rather than euphoria, a less severe downturn might follow. However, this doesn't fully account for the historical trend of diminishing losses in bear markets, where each cycle becomes slightly more "bearable." Even if Bitcoin doesn't surge as much, it doesn't guarantee a smaller decline, a pattern observed in other markets like the S&P 500. A significant headwind for Bitcoin this summer could be the resurgence of energy stocks. In 2022, energy stocks, represented by XLE, peaked in the summer, coinciding with a local low for Bitcoin. A similar pattern is anticipated, where XLE highs correspond to Bitcoin lows. Rising energy prices make it difficult for the Federal Reserve to cut rates, which negatively impacts crypto, given its dependence on loose monetary policy. While a 2019-like comparison offers a bullish outlook, where Bitcoin dominance rises without a significant altcoin rotation, the current timing might be too early for a durable breakout. The 2018 pattern saw Bitcoin make a low in February, a higher low in early April, then rally to the bear market resistance band in late April/early May before being rejected and dropping into June. This mirrors the current price action and geopolitical events, albeit with different specific conflicts. The idea of a prolonged "digestion phase" after a bull market also suggests that it's too early for a durable bull market. If the 2019 bull market lasted about six months, followed by a matching digestion phase, the current uptrend seems too long for such a short digestion. Even if a low of 60k is established, a retest later this year, likely in summer or October, is still expected. In the short term, a test of the 200-day moving average is probable for Bitcoin during the bear market. The continued downward trend of the 200-day moving average, now below 85k, suggests further potential for decline. The projection is for another surge in energy stocks and prices, correlating with a high for Bitcoin, and then a subsequent low for Bitcoin aligning with the next high in energy stocks. If Bitcoin fails to break through the bear market resistance band and rally to the 200-day moving average, unlike in 2022, it would indicate a weaker market. The absence of a euphoric top could imply a lack of interest in crypto this year, potentially delaying a resurgence until next year. Comparing the year-to-date ROI of 2026 (orange line) to 2018 reveals similarities. 2018, with its euphoric top, was a more volatile version of 2026, showing a low in February, a higher low in April, and a rally into late April/early May, followed by a market decline into the summer months. This pattern is currently on the radar. Furthermore, the current position of Bitcoin at the top of the range when compared to the average of prior midterm years and their standard deviation suggests that current market behavior is not abnormal. Another concerning pattern is the stablecoin dominance testing its bull market support band just as Bitcoin tests its bear market resistance band. This historically precedes a significant upward move in stablecoin dominance. While a large move up in stablecoin dominance has often not been the ultimate high, it's too early to confirm that for February in a midterm year. In 2018, Bitcoin sold off before the FOMC meeting, then rallied shortly after, found a lower high, and declined into June. This sequence is currently being replicated. The 2014 cycle, where the high didn't come until June, is considered less likely this time because the rally in 2014 started in May, whereas the current rally began in April, similar to 2018. The current fight at the bear market resistance band is expected to last for the next week or two, with a resolution anticipated before June.