Mapping Out the Next Bitcoin Cycle by dave the wave
DISCLAIMER; This post and its contents should in no way be considered investment advice.
This is the third piece to come out of our contributor series which represents market analysis by individuals independent of the MAX Exchange, helping to write quality content on our platform in a freelance capacity. This article is a follow-up piece by dave the wave to one he wrote three months previously that may have called the bottom. In continuity with what was then modeled, this article will look at both the nature of this bottom, and the possible extent of the next cycle. The previous article may be found here:Bitcoin & the Logarithmic Growth Curve by dave the wave
Since suggesting the bottom was in a few months ago, the price of Bitcoin has proved so far to hold up remarkably well. The registering of a higher low and [arguably] a higher high on the chart further supports the notion that the bottom may well be in. On the medium term chart [second one below], these price points together help form a large ascending triangle, a technical pattern that dominates the chart presently. Typically, analysts interpret this to be bullish, where on the break of the triangle, price can quickly run to the upside.
Of course, something like this pattern would be expected if a base were to be forming here, and it would be something similar to the base formed in the previous cycle. This article will look at the possible nature and length of this base, and then go on in turn to sketch out the likely fuller parameters of the next cycle over-all. My purpose is to provide a scenario, simply from a charting perspective, whereby the conventional investor might consider staking a position in this most volatile market. My aim is to show, with the use of TA, that their is a rhyme and reason to what might otherwise be perceived as chaotic price action. I also aim to provide some price targets whereby profits might be realized, all of which is by its nature speculative but within the realms of real possibility.
To begin with, the following chart compares the present bottom forming to the previous bottom of the last cycle. Prospective buyers may be looking to cautiously average in here during what is known as the extended ‘accumulation period’, that period where price is largely range bound at the bottom before it starts to move up in the next market cycle toward consistent higher highs, and eventually toward a recovery of the previous all time high.
Common to both bottoming periods here is the squeezing of the price between the medium-term average [200 MDA] and the long-term average [1400 MDA/ 200 WMA]. This represents the medium term trend of the spike and correction coming back to the more stable long-term trend of the logarithmic growth curve [as illustrated in the previous article]. Also of significance here is the reducing volatility of price as is notable in a close-up of the following chart.
Here it’s clearly seen that the volatility of this basing pattern is something like a half of what it was in 2015. And this is something you’d expect in a maturing, more liquid market — the general principle being that with more liquidity, comes less volatility.
Also predictable, on the basis of the log growth curve model, is a longer base than previously — not only is volatility in the medium term reducing [hence a less volatile base], but so too is volatility reducing on the over-all long-term macro chart of Bitcoin. As the growth curve develops toward a future plateau, cycles become extended in length, and then that extension is found primarily in the base and recovery components of the cycle [in contrast to the corrections]. This principle is observable on the longer term chart where the full cycles of Bitcoin [to this date three] can be compared. As the curve ‘falls away’, creating a less steep angle, the length of the base increases, and so too the recovery period to previous highs.
All of this leads onto the next question — if Bitcoin is marked by concurring volatile cycles, and if we are presently at the end of the old cycle/ start of the new, what could the extent of the next cycle be like? Though speculative, I think it is sensible to offer a prediction, on the basis of TA, as to what the magnitude of the next cycle might be. For it is only on the basis of such calculations, where investors might identify a long-term trend, where the rewards offered are sufficient to off-set the risks undertaken, that investors might be willing to stake a position.
Relating to the increasing base and lessening angle [of appreciation on the ‘y’ axis] of the cycle is the extension of time each subsequent cycle takes from the base to the next parabolic spike. Remarkably, each subsequent cycle has required an extra year as is illustrated in the following chart.
The above chart effectively establishes a possible time target for the next cycle. With the ‘x axis’ established, this just leaves the ‘y axis’ of price. I think the best tool for this exercise may be the MACD [in the logarithmic scale] as this tool outlines most clearly the reducing volatility/ increasing price stability that is at the center of this pivotal notion of a developing logarithmic growth curve.
This last chart depicts clearly the principle of reducing volatility in both the converging channel [top section of chart] and the converging logarithmic MACD. Both the MACD and the logarithmic curve point to eventual stabilization at an exponentially much higher price. Of note is the slower ascent predicted on the next cycle. This reducing volatility equates with increasing liquidity equating. The convergence of the channel predicts a decreased magnitude in the next peak. This coincides with the idea of ‘diminishing returns’ as the growth curve and the market matures.
Though the largest gains may have already been made in previous cycles, there is still much room to the upside for this next cycle. For those investing at the end of this correction and the beginning of a new cycle [which is plausibly where price is currently, based on the above charts] then the ‘accumulation phase’ may turn out to be a lucrative investment indeed. The model about predicts a 2800% on a parabolic spike to 100K from current prices… though realistically, this will take the best part of four years. And then of course, one might begin to think about exiting strategies, but that would be the topic for another article.
If interested in reading further on the medium and long term prospects of Bitcoin, on the macro issues, and also on the plotting of alt charts, the author can be contacted at @davthewave on Twitter for both free and subscription-based analysis.
DISCLAIMER; This post and its contents should in no way be considered investment advice. We may individually hold positions in some of the assets we discuss. Any projections, conclusions, analysis, views are to be considered hypothetical & for informational purposes only & not meant as recommendations for investment. Anyone considering an investment in crypto should only invest what they can afford to lose. You alone are responsible for evaluating the risks & merits of our content.