In our last post of the three-part historical charts series, we’ll be examining a helpful chart that signals when a crypto bull market is over and lets us know when to prepare for the next long bear market. There are a bunch more of these types of helpful charts in The Modern Investor that really put the pieces of the larger puzzle together. In fact, one of the most important long-term charts in all of crypto is at the end of the historical chart section (Chapter 8) in the book. If I gave away all the charts here on the blog, I’d be taking away my own book sales. Let’s get in to this post’s chart.
A Chart that Signals a Bull Market is Over
The chart we’ll look at here uses the Stochastic RSI on the monthly time frame for Bitcoin. You’ll notice that the Stochastic RSI has only crossed below 20 three times in the history of Bitcoin. The first two times led to bear markets in 2014 to 2015 and 2018 to 2019. The third time occurred in our most recent market cycle, again leading to a bear market.
The critical 20 line has been marked for the Stochastic RSI with a horizontal line on this image. One of the key questions you might be thinking is, “How much did Bitcoin drop after this confirmation signal?” That’s a great question because, after all, it’s not very helpful if we utilize a confirmation signal once Bitcoin has already corrected 70%. That’d be like someone yelling “Fore!” on the golf course after the ball strikes you right in the temple. “Oh, thanks. I appreciate the heads up!”
As you can see, Bitcoin’s price fell roughly 69% in the second cycle, 58% in the third, and 58% so far in our fourth cycle after this Stochastic RSI confirmation went below 20. Now that’s a pretty useful signal.
Like always, these posts are just a sample of the content that’s in The Modern Investor. If you want access to more in-depth historical charts like this, feel free to check it out on Amazon.
Thanks for reading! If you enjoyed this, you can check out the other articles and don’t forget to follow me on Twitter @andrewdfarrar for up-to-date crypto content. In these crazy times, it’s never been a more important time to learn about this new asset class.