Bitcoin has entered a period marked by its fourth consecutive red monthly candle, a trend that has analysts, including EGRAG Crypto, analyzing potential implications for the cryptocurrency”s future. This pattern appears to form part of a structured sequence rather than random fluctuations in price, suggesting a more complex underlying market dynamic.
Historically, Bitcoin tends to follow specific monthly patterns in its price cycles. Rather than hitting a bottom immediately following sharp declines, the cryptocurrency often goes through phases of compression, liquidity flushes, and temporary relief rallies before establishing a final cycle low. This behavior aligns with observations from past cycles.
Analysis of Historical Cycles
Looking at previous macro cycles, distinct patterns emerge:
- Cycle A concluded with five consecutive red months before a confirmed bottom.
- Cycle B exhibited clusters of red months—three, four, two, and three—each followed by a relief bounce, except the last cluster, which marked the cycle”s bottom.
- Cycle C showed two red months followed by a relief rally, then six additional red months leading to the final low.
- Cycle D reflected a sequence of three, three, two, and two red months before confirming a bottom.
The recurring theme across these cycles is the sequencing of price movements. It is rare for Bitcoin to bottom out immediately after an initial downturn; instead, it typically undergoes a compression phase, experiences liquidity flushes, bounces, and only then reaches its ultimate low.
Current Market Structure
In the current cycle, Bitcoin is nearing its fourth consecutive red monthly candle. Notably, a significant relief bounce has yet to materialize, suggesting that the market is still in a pre-relief compression phase rather than having reached a confirmed bottom. The absence of a relief rally is particularly critical; historical data indicates that relief rallies usually occur before the final bottom, not afterward.
Possible Scenarios Ahead
Analysts have outlined several potential paths forward:
- Base Case (Highest Probability): The fourth red month completes, followed by a short relief bounce—a potential reset rally or dead-cat bounce—before one final red leg, possibly a fifth or even sixth red month, establishes the true bottom.
- Alternative Case: A relief bounce might happen immediately after the fourth red month, but the bottom could remain unconfirmed, leading the market to revisit or slightly undercut previous lows.
- Least Likely Scenario: An immediate V-shaped recovery with no subsequent red monthly candles, a scenario that historically has been rare for Bitcoin.
This current phase appears to reflect capitulation compression rather than an expansion, indicating that pressure may still be building beneath the surface. Previous cycles have shown that relief rallies typically occur before the final bottom forms, not after a resurgence of strength.
In conclusion, while four red monthly candles historically indicate late-stage downside for Bitcoin, they do not necessarily signal an end to the downward trend. If historical patterns hold, a relief bounce may be imminent, but the final cycle bottom is likely to follow after that rally.
