A lot has happened since my last post on Bitcoin earlier this year, and since, things are going accordingly to my last article.
Yes, as you might already know (or maybe not yet), Bitcoin has returned to the ATH (all time high) of 2017 which was, depending on the exchange, in the 19,300 -19,800 range.
Why is this important? Well, it just confirms the fact that Bitcoin is here to stay, and not only that, Bitcoin is an alternative investment vehicle like no other. But I’m not going to talk about the fundamentals of BTC and why it is great, you can follow Michael Saylor, the CEO of MicroStrategy who turned into a Bitcoin bull this year, and he shares on a constant basis why Bitcoin is great.
Let’s look at the charts a bit. The old saying is history doesn’t repeat but it rhymes.
We have exhibit A here, which is the chart showing the price action from the 2013 ATH to the very next time that ATH was reached again 3 years later.
The Daily chart looks like this:
We can see the blow off top of 2013 followed by a 1 year bear market, 1 year consolidation/bottom/accumulation and a steady 1 year rise until the previous ATH was reached again.
Looking at the Weekly chart, we can see a -86% decline from top to bottom and an aprox 1100 days time frame until the price returned to the same high.
Now let’s look at the current cycle:
The current cycle looks very similar, but with 3 deviations happening. The first one was during the 2018 BCH/BSV hard fork and the hash war debacle that followed. There was much incertitude in those days and people were scared by the fact miners could drop (some did drop) the legacy BTC network and move somewhere else. For this reason we have that nasty -50% drop from the $6K levels.
The second deviation was fueled by a chinese Ponzi scam called PlusToken, where asian investors were lured into buying (mostly) BTC to participate in the Ponzi, ending up as the biggest one in history with more than 4B amassed in the scam. The subsequent cool off was logical after the Ponzi ended and their beneficiaries started selling.
The third deviation happened this year when all markets were in turmoil and everything crashed, from stocks to gold to cryptocurrencies.
These 3 are deviations because price returned to mean shortly after and that can be easily seen on the chart as well, with the same 1 year bear market, 1 year consolidation/bottom/accumulation and 1 year rise.
This weekly chart shows an almost mirror like drop from top to bottom, -83% this time, and almost the same time period to return to ATH, merely 1100 days.
Okay, now that we have seen the similarities, what conclusion can we draw from all this?
First, let’s look at what happened in the immediate future after the 2016 return to ATH.
The first picture illustrates the moment the price returned to ATH followed by a sharp -36% correction.
In the second picture, we can see the ATH was surpassed, hype was building, then a lot of market participants took profits and another -32% correction occurred.
How can we correlate this to present times? Well, if history rhymed so far, i see no reason for it not to continue rhyming, hence I expect a similar (at least one) correction to happen.
In my opinion one of the 2 scenarios will happen (we did have a small correction last week) but i can’t disregard a more ample one.
One possible scenario will be the same 1-2 pattern, when we hit ATH we drop, we pass ATH not by much then drop again, something like this:
Or, we could already account for the 1st drop, so, we are headed for second scenario, where we go 10–20% above current ATH and we have a -30–35% correction then, something among these lines:
As we can see, there is a strong enough chance that we revisit the 13k–14k levels, which I see both logical and healthy for the over uptrend. Market participants will need to book profits, since we are sailing in unknown waters.
This is a medium time frame analysis, both logical and high probability or occurrence.
But what exactly happened in 2016 after the ATH was reached?
Magic has happened and a lot of millionaires have been made during those times.
From the old top to the new ATH, BTC has seen a whooping 17x increase in 1 year and ended up being in every news bulletin, newspaper and financial site at the end of 2017, attracting a lot of noob retail investors and traders, lured in by greed and the possibility of making them millions rapidly.
Today, we have a much different setup, much different market participants, as many large institutional investors, funds and experienced traders have joined the game and invested massively this year alone.
The COVID uncertainty and a much anticipated financial crisis that is bound to happen in the near future made these players consider Bitcoin a worth having asset in their portfolios.
I am an overall bull on BTC, but I’m trying not to be a bulltard, for this reason I foresee one of the 3 scenarios (a pessimist, a conservative and an optimist scenario) all based on past performance, which might or might not be indicative of future results.
In a pessimist scenario, We are now around the top and price will zig zag between 20k and 8k levels for the entire year (+/- 20% of these numbers).
I don’t believe much in this scenario, but since I am not a fortune teller, I can’t disregard such a play. Fear might strike like lightning in the markets, and participants will want to stay mostly in cash and be more risk adverse.
The second scenario is a bullish conservative one, since many institutions are piling up on BTC and retails traders are nowhere in sight; the following year could see 3–5x increase from current top, ending up in the 50-100k region.
I see this scenario with a much higher probability of happening than the first one, considering the market conditions and the strong fundamentals of BTC.
The last possible scenario is purely based on mimicking the last bull cycle of BTC, where euphoria hits the market again, BTC makes headline after headline, your Uber driver is recommending you to buy BTC while shilling his Coinbase referral for you to join, your old retarded friends are calling you to ask about BTC and your Thanksgiving dinner has a slot allocated for BTC investment talks.
This scenario has the same chance of happening as the pessimist one.
Position yourself accordingly or at least watch and be aware and don’t buy the next top.
This is not financial advice, only my opinions and conclusions on the matter, so please treat it accordingly.
If you read this far, I thank you deeply and would appreciate a clap or two.