BITCOIN TRADE

Bitcoin Fund // Phase: Trough

Length of First Quadrant:

Trough Duration:

Trough Depth:

Retracement Rate:

Total Wave Duration:

Fourth Peak: November 30 2013. Value: US$1141. First Quadrant: January 10 2014 (1.5 months).
Fifth Trough: June 8 2014 (24 months). Value:: $152 (-86.7%).
Fifth Peak: December 17 2017 (18 months). Value: $19,891 (+13,000%). First Quadrant: January 12 2018 (1 month).
Sixth Trough: March 7 2018 (15 months). Value: $3558 (-82.1%).
Sixth Peak: July 9 2019 (1 month). Value: $12,573 (+355%). First Quadrant: February 22 2022 (7 months).
Seventh Trough: March 9 2020 (1.5 months). Value: $5200 (-58%).
Seventh Peak (Double Peak): November 9 2021 (16 months). Value: $66,971 (1287%). First Quadrant: November 23 2021 (2 weeks).
Eighth Trough: May 9 2022 (13 months).. Value: $14,264 (-78.69%).
Eigth Peak: March 2024 (11 months).. Value: $413,000 (+4284%).

ELLIOTT WAVE STATUS: Wave B (correction).
MOMENTUM: Bearish.
CURRENT RESISTANCE ZONES: US$75,000.
CURRENT SUPPORT LEVELS: US$68,000 // $60,000 // $50,000 // $45,000 // $37,000 // $32,000 // $28,000 // $25,000 // $22,000 // $20,000 // $17,000 // $14,000 // $11,600-$12,296 // $10,500 // $9500 // $8500 // $7275.
DAILY VOLUME: US$15,800,000,000 (July 1, 2020); $435,000 (December 30, 2019).
VOLATILITY (MAXIMUM HIGH OVER LOW): 514%.

Smoking the $-Curve

I USED TO ASSUME THAT BITCOIN WOULD GROW RELATIVE TO THE AMERICAN DOLLAR BY 6% PER MONTH, OR 100% EVERY YEAR, UNTIL IT FINALLY SHOT FREE FROM THE S-CURVE. Indeed, this was how Bitcoin behaved during the '10s.

Bitcoin is in the Era of Ferment stage of its life cycle, and has yet to enter the Early Adopters phase, and cross the chasm. Nonetheless, it did seem to increase in value 100% per year, for its first decade at least. I was not the first to draw this conclusion. Visionary trader Venzen Khaosan made the same discovery way back in 2014, while describing a chart: "This up-sloping support line can be interpreted as Bitcoin's minimum growth trajectory. It is currently at $120 which means it has doubled since a year ago, and this doubling continues at an annual pace according to the support floor's present inclination..."

In 2018, I surmised that Bitcoin's price could surge as high as 1300% above the support floor, at any time. The upper range of prices from 2014 to 2020 (projected) can be shown here: US$1300 (2014), $2600 (2015), $5200 (2016), $10,400 (2017), $20,000 (2018), $42,250 (2019), $84,500 (2020). The lower possible range of prices over the same period is: $100 (2014), $200 (2015), $400 (2016), $800 (2017), $1600 (2018), $3200 (2019), $6400 (2020).

While price spikes might be exciting, they happen quite rarely. Most of the time, price just bounces along some distance above the floor. In my analysis, bear markets last three times longer than bull markets. Absolute lows are hit once every 18 months or so. The complete cycle, from peak to following peak, seems to be getting longer -- the last one stretched for four years.

The old trading adage is: buy when prices crash, sell when they boom. In my experience, during slumps price declines by an average of 85% compared to the previous peak. This seems to be true for altcoins and dapps too (relative to Ethereum).

THE BENEFITS OF HINDSIGHT

LET'S IMAGINE that in May 2018 you had US$2500 (or AUS$3600) in fiat, and you wanted to buy Bitcoin. While the support floor at that time was around US$2500, Bitcoin was actually selling at US$9000 on major exchanges, just under half of its value during the December 2017 peak. With the benefit of hindsight, it was clear that the upwave was wearing off, and Bitcoin was entering a new trough. One might assume that Bitcoin would never again drop as low as $2500, given the time needed for the price to drop so low. It would in fact be pointless to save money for such an eventuality.

That is indeed what happened, but it is never easy to foretell the future. Hindsight is always 20/20. My theory could be wrong, and Bitcoin could have rebounded back to US$20,000, and stayed there forever. One could therefore identify six realistic long targets: US$8000, $7000, $6000, $5000, $4000 and $3000. If I had AUS$3600 to spend, I could enter long at each stage with AUS$600, buying: 0.057B, 0.064B, 0.075B, 0.0866B, 0.114B, 0.12B and 0.166B. That's a total of 0.682B!

Now, considering that I am limited to 1/2015th of my CJ cash fund for each Bitcoin purchase, it might be difficult to accumulate the desired levels at the lower targets. Buying Bitcoin at US$8000 should be easy, because that will remain in the price range for another 18 months. However, I have only another 6 months to buy Bitcoin at $4000. Therefore, it is only natural to concentrate my buy orders at this level, and to make my buy orders three times the value (that is, they can be worth 1/5th of the CJ cash fund.)

As it turned out, Bitcoin dropped to a low of $3236 on December 16, 2018. I never had a chance to buy at US$3000, so the AUS$600 I saved for this eventuality was wasted. If I had saved all my fiat and bought Bitcoin on December 16, 2018, I could have bought 0.775B.

AN ALTERNATIVE HYPOTHESIS

HERE IS a new approach, one that is more evident on the logarithmic chart. It can be seen that in July 2013, Bitcoin reached an absolute low of US$68.75. On August 25, 2015 BTC fell to $210. That's a 141% increase, in 2 years (25 months to be precise), between these two points. Somewhat less than the 100% per year inflation that I first speculated upon. 6% per month growth is too high. What about 5%? That is too high too. 4.5% might be closer to the mark. 4.6% is even better. That comes to 72% per year.

According to this hypothesis, the minimum possible price of Bitcoin in December 2017 was $737. Since Bitcoin reached a value of $19,302 in this month, we can predict that price can surge by 2650% at any time (since the peak was 26.5 times above the minimum floor) . From this perspective, we can see that the Bitcoin wave now takes longer than four years to repeat itself (and this could be a function of increased liquidity). This, too, makes sense..

In December 2018, when Bitcoin dropped to $3200, the Absolute Minimum Support Lone was at $1264. This placed it inside the 4th Quadrant. The following July, price rose to a peak of $12,285, 7 times the support line (and, thus, at the bottom of the 3rd Quadrant). Had price rose higher, I could have increased the size of my shorts to B0.03..

Crypto pop legend Magic Poop Cannon claimed that Bitcoin is in the final stages of an Elliot Wave that began in 2010. "That five wave impulse began in 2010 and ended in 2017," Cannon wrote. "Since then, BTC has been in a classic ABC correction. Now, there are some people out there who may disagree with the wave count, but the Gaussian Channel says otherwise. You can see that the wave counts are perfectly recorded in the Gaussian Channel, proving that we're currently in a series of corrective waves."

A THIRD HYPOTHESIS

A THIRD HYPOTHESIS comes from Dave the Wave, which takes into account the increasing liquidity in the crypto market. Instead of doubling in price according to my theory, Bitcoin's growth is destined to slow and eventually stabilize in relation to gold and the US dollar. As Dave explains: "First you see explosive growth, and then that growth, while remaining explosive, diminishes in relative terms. And of course, this is what you want from an alternative currency that is to function as a store of value - eventual price discovery and relative stability..."

Bitcoin's logarithmic growth curve, as foretold by Dave the Wave

While the gains will cease being astronomical, they are still projected to be stratospheric.

Looking closer at Dave's chart, one can see the price band not only flattens, but narrows over time. Peaks become lower, and the wave repeats itself faster. At the end of 2021, the potential price range stretches from US$10,000 to $80,000: a 700% divergence. The floor will double in the following year, to $20,000, while the maximum high possible will be $160,000.

My algorithm might have been good in the mid to late 10s, but there was another dimension I was missing... Dave the Wave has enlightened me about that.

DECLINING DOMINANCE

WHEN IT comes to Bitcoin dominance, there is a descending ceiling has been dropping from 94.1% in April 2013, to 66.2% in November 2019. You could call this Bitcoin's coinrot (relative to the total cryptomarket.) In July 2017 there was a tremendous drop, down to below 50%, and it looked quite possible that Bitcoin might lose its crown (the Flippening, as it was called at the time.) In January 2018, Bitcoin comprised only 33% of the total market. That is as low as it went. Since then, dominance has returned to the ceiling…

Looking at the chart, it looks more like an inverted rally, than a trough. In fact, the entire wave was 6 years long, Bitrot seems to be about 0.22% per month, or 3% per year.


The real Flippening will be when Bitcoin usurps the US dollar. As Lyn Alden points out, most fiat currencies eventually become worthless.

Bitcoin Target US$35,000: click
Bitcoin Target US$35,000: click here.

Chart courtesy of Coin Market Cap

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