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History Says Bitcoin Has Bottomed and Will Rally. This Time May Be Different.

Bitcoin has become increasingly correlated with stocks over the past year.

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Ozan Kose/AFP via Getty Images

Historical trends suggest
may have hit its bottom after a year long bear market and be poised to rally. But the correlation between cryptocurrencies and the stock market means it may not matter—and cryptos could be vulnerable to more losses.

While the largest crypto has soared 40% since the start of 2023, that belies what a bad stretch Bitcoin has had: Down two-thirds from its late-2021 high as the total market capitalization of digital assets fell to $1.1 trillion from nearly $3 trillion.

But things have recently improved, with Bitcoin picking itself up from a two-year low around $15,500 in November to march steadily higher since. Data from previous bear markets and subsequent bullish turns would that the worst of the “crypto winter” that has sent a chill through markets for months is ending.

In the majority of cases where Bitcoin has seen a rally for eight days or longer, it goes on to realize significant gains over the following three-, six-, and 12-month periods, noted analysts at crypto exchange Bitfinex in a Monday report.

More telling is what happened in the few cases when Bitcoin was down three, six, or 12 months after such a long winning streak. After an eight-day rally in late 2017, Bitcoin notched losses at the three-, six-, and 12-month mark. It happened again at the same intervals following the next eight-day rally, which occurred in 2019. But the following eight-day rally went on to usher in spectacular gains.

“Typically, after two such rallies, one after another, the next one has gone on to provide the highest percentage of rewards in the asset’s history,” the Bitfinex analysts said.

The market is approaching a point where the next such case could play out. 

A 10-day rally in late 2021 has since seen negative returns over the following three, six, and 12 months, and the next eight-day rally after that was in March 2022—following which Bitcoin was negative at the three- and six-month mark. Historical trends suggest Bitcoin will be negative year-over-year by the end of March, which would only require a price level below $40,000, which is far off.

A price target for Bitcoin above $40,000 in less than two months seems unrealistic. This would suggest that the largest crypto is on track to solidify another instance of falling three, six, and 12 months after two consecutive rallies of eight days or longer.

Which means the next long-enough rally—which already occurred, just days ago—should usher in spectacular gains, if history plays out again.

However, “we are not out of treacherous waters yet,” the Bitfinex analysts said. There’s one overwhelming argument to undermine these alluring historical arguments. 

Bitcoin and other cryptos have become firmly linked with the stock market over the past year, bucking their trend of independent performance, as high inflation and rising interest rates dampened demand for all risk-sensitive assets alike. That correlation remains strong, which means the
Dow Jones Industrial Average
S&P 500
are the most likely factors dragging Bitcoin around. And the macro outlook for stocks—like Bitcoin—looks a bit bearish at the moment.

“Since the asset class is currently highly correlated to the U.S. stock market, bearish macro developments can restrict the asset from repeating past performances,” the Bitfinex analysts said.

That about sums it up. While the historical factoids look alluring, investors may want to take heed and not get caught up in what might be another head fake for a beaten-up asset that increasingly looks to be at the whim of wider sentiment.

Barron’s has flagged an argument for investors to sell the current rally in stocks, because the market looks like it’s trying to fight the Federal Reserve, which could shock traders this week by telegraphing that the end of high interest rates is still far off.

Crypto traders may want to do the same.

Write to Jack Denton at


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