Bitcoin Faces Potential Drop to $12K-$14K Post-Midterm Elections, Analysts Warn

Historical Patterns Resurface

As U.S. midterm elections approach, Bitcoin (BTC) investors may want to keep a close eye on historical trends that mirror the current market conditions. Analysts are noting that an eerie fractal from the 2018 bear market offers insights into what could unfold for Bitcoin before the year concludes. The comparison between Bitcoin’s price action before the 2018 midterms and the current state shows intriguing similarities.

Price Action Analysis

Bitcoin exhibited a downward trend in 2018, maintaining a horizontal support level near $6,000 before breaking below it post-midterms. In 2022, Bitcoin is currently poised to break below a similar support level of around $19,000. With the midterm elections scheduled for November 8, analysts suggest that this breakdown may happen soon, as illustrated in the daily price charts.

Potential Price Forecasts

Independent market analyst Aditya Siddhartha Roy predicts that should a breakdown occur, Bitcoin prices could fall into the range of $12,000 to $14,000, echoing the lows seen in 2018. He speculates that this bottoming out could happen between November and December 2022, mirroring previous cycles.

Bitcoin’s Correlation with U.S. Equities

Compounding these bearish predictions is the growing correlation between Bitcoin and the U.S. equities market, particularly following the Federal Reserve’s monetary policy changes. Historically, the stock market tends to perform better in the six months following midterm elections, but Liz Ann Sonders, Chief Investment Strategist at Charles Schwab, points out that 2022 may diverge from this trend due to high inflation rates and unprecedented monetary policies.

The Case for Optimism

While pessimism prevails, some in the crypto community argue that Bitcoin could decouple from traditional markets, fueled by long-term holders who are unlikely to sell. Stephane Ouellette, CEO of FRNT Financial Inc., noted that a weakened correlation between Bitcoin and the S&P 500 could signal resilience within the cryptocurrency market.

Investor Accumulation Trends

Additionally, there has been a notable increase in the number of unique addresses holding at least one Bitcoin, which reached a new record high on October 17. This accumulation behavior, contrasting sharply with trends observed during previous bear markets, suggests that investors are becoming more bullish at local price dips.

Technical Analysis Signals

Market analysts are observing promising technical indicators, including an extremely oversold relative strength index (RSI) and Moving Average Convergence Divergence (MACD) readings on weekly charts that suggest a potential upcoming accumulation period for Bitcoin. The differences in RSI levels, with 2022’s figures at historic lows compared to 2018’s neutral readings, highlight the current market’s unique character.

Concluding Thoughts

As the midterm elections draw near, Bitcoin’s price trajectory remains uncertain. While historical patterns suggest potential declines, a growing optimism among long-term holders and the emergence of favorable technical indicators could provide a counterbalance. Investors should remain vigilant and consider these mixed signals as they navigate the turbulent waters of cryptocurrency trading.