When Capitulation? 3 Ways Bitcoin's Bear Market Might End

It's an understatement to say the current price of the world's largest cryptocurrency pales when compared to its past glories - at $6,700, bitcoin is down roughly 60 percent from its all-time high.

Applying these theories, a market might be expected to "Bottom," or reach a new low, after a speculative bubble bursts in a moment often referred to as "Capitulation." Consisting of extreme selling over a short time period, the infamous 2014 bitcoin bear market finally bottomed out after it lost more than 40 percent of its value in less than three days at the top of 2015.

While technical analysts only take price action into account, it's impossible to ignore the implications a bitcoin ETF could have on prices of the cryptocurrency.

As an indication of the effect an ETF can have on prices of an asset, gold prices increased drastically in the years following the introduction of an ETF. Using this as a measure, it's valid to assume bitcoin would succumb to a similar and explosive fate.

As shown in the above chart, ascending trend lines of support have played an important role throughout the history of bitcoin prices.

The first trendline took effect in 2012 when it provided reliable support for a strong uptrend from $2-$16. After surpassing $16, price action went completely parabolic, straying away from trendline until making a return at the end of 2014.

Price broke through the support and immediate capitulation took place, selling off more than 40 percent of bitcoin's price in three days.

Since the infamous capitulation and 2015 market bottom, price found a new ascending support that will look to once again come into play sooner than later.

If there's no bitcoin ETF approval, one could argue there's no reason for bitcoin to resume its bullish uptrend until a market bottom occurs like it did in 2014-2015.

Upon a close examination of the price level where the first ascending support trend line was breached in Jan. 2015, it coincidentally also marks the exact peak of the prior "Mega" bull run when price surged nearly 1,000 percent from $16 to $240. In a sense, breaking both the trend line and prior bull run high was a "Double whammy" to investors giving them no other choice than to lose complete hope, the necessary precursor to capitulation.