Bitcoin is showing striking similarities to the chart patterns that preceded the historic 2,000% rally of 2017, according to multiple technical analyses published on July 19, 2020. With BTC trading around $9,185, several key indicators suggest the cryptocurrency may be on the verge of a macro breakout that could reshape the market landscape for years to come.
TL;DR
- Bitcoin’s current chart pattern closely resembles the setup before the 2013 and 2017 parabolic rallies
- Hash Ribbons indicator confirms a macro buy signal, which historically precedes 5,000% average rallies
- Charles Edwards’ Hash Ribbons track short-term and long-term hash rate moving averages
- S&P 500 correlation poses a risk, with some analysts predicting a stock market crash
- Q2 2020 earnings season expected to be among the worst in decades
Chart Pattern Echoes Previous Cycle Breakouts
A prominent cryptocurrency trader known on Twitter as @BTC_JackSparrow shared a macro Bitcoin chart that has captured the attention of the crypto community. The chart overlays Bitcoin’s current price structure with annotations of previous halving events and key cycle turning points, and the resemblance to pre-rally periods is unmistakable.
According to the analysis, Bitcoin’s current consolidation phase following the May 2020 halving mirrors the accumulation patterns observed before both the 2013 and 2017 bull runs. In each previous cycle, a prolonged period of sideways price action gave way to a parabolic advance that pushed Bitcoin to dramatically higher highs. Each successive rally brought Bitcoin to a peak approximately an order of magnitude higher than the previous cycle’s top.
Should this historical pattern repeat, the implication is that Bitcoin is positioned for a strong breakout in the months ahead, potentially followed by a rapid ascent to a new all-time high. The 2017 rally, which saw Bitcoin climb from below $1,000 to nearly $20,000, represents a gain of approximately 2,000%, and the current chart structure suggests a similarly explosive move could be building.
Hash Ribbons Confirm Macro Buy Signal
Adding weight to the bullish thesis, Charles Edwards, a digital asset manager and creator of the Hash Ribbons technical indicator, confirmed that the indicator has just flashed a macro buy signal. The Hash Ribbons derive their signals from the interaction between short-term and long-term moving averages of the Bitcoin network’s hash rate.
The hash rate is a measure of the computational power securing the Bitcoin network, and its trend is considered a leading indicator of miner sentiment and network health. When the short-term hash rate moving average crosses above the long-term average, it signals that miners are expanding operations, historically a bullish development.
Edwards’ research has found that each previous Hash Ribbons buy signal has been followed by an average rally of approximately 5,000% in the months and years that followed. While past performance does not guarantee future results, the consistency of this signal across multiple market cycles gives it significant weight among analysts who track on-chain and technical indicators.
The S&P 500 Correlation Risk
Despite the bullish technical setup, a significant risk factor looms over the cryptocurrency market: Bitcoin’s growing correlation with the S&P 500. Analysts on Wall Street and within the crypto space have observed that Bitcoin has been moving in tandem with equities, with price movements in the stock market reflected in BTC within seconds.
This correlation is particularly concerning given the macroeconomic environment of mid-2020. The global economy is reeling from the COVID-19 pandemic, and Q2 2020 earnings season is widely predicted to be among the worst economic quarters in decades. If corporate earnings disappoint and the stock market sells off, Bitcoin may be dragged lower regardless of its own bullish technical signals.
Scott Minerd, global chief investment officer at Guggenheim Investments, has publicly predicted that the S&P 500 could plummet to 1,600 in the months and years ahead, representing a catastrophic decline from current levels. Financial analyst Gary Shilling has drawn even more alarming parallels, suggesting that the current stock market environment mirrors the early stages of the Great Depression.
Balancing Technical Signals With Macro Headwinds
The tension between Bitcoin’s bullish technical picture and the bearish macroeconomic backdrop creates a complex environment for investors. On one hand, the cryptocurrency is displaying multiple signals that have historically preceded enormous rallies, including compressed volatility, tight Bollinger Bands, Hash Ribbon buy signals, and chart patterns mirroring previous cycle bottoms.
On the other hand, the COVID-19 pandemic continues to generate economic uncertainty, and any sharp deterioration in traditional markets would likely spill over into Bitcoin and the broader cryptocurrency space. The correlation with equities that developed during the March 2020 crash has not fully unwound, and investors must weigh both the technical and macro inputs when positioning for the months ahead.
For Bitcoin maximalists and technical analysts alike, the current setup represents one of the most compelling risk-reward configurations in recent memory. The coming weeks and months will reveal whether the bullish technical signals prevail over the macroeconomic headwinds, or whether the stock market correlation proves to be the dominant force.
Why This Matters
The convergence of Hash Ribbon buy signals, pre-rally chart patterns, and compressed volatility creates a technically significant moment in Bitcoin’s market cycle. Historically, such setups have preceded the largest moves in the cryptocurrency’s history. However, the unprecedented macroeconomic environment of 2020 adds a layer of complexity that did not exist in previous cycles. Investors should monitor both the technical indicators and the broader economic landscape as this scenario unfolds.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Cryptocurrency investments carry significant risk, and you should conduct your own research before making any investment decisions.