Very interesting long-term analysis of Bitcoin
Over the course of my trading experience which, to be truthful, started only a year ago, I’ve come to realize that the most reliable method of technical analysis is using trend-lines. During a rising bull market, the trend is defined by progression of higher lows, and during a descending bear market, you can draw a trend-line by connecting two most significant highs.
This method suggest that when a trend-line is penetrated, the trend is no longer active and has reversed. Such trend-line violation defined the start of primary bull markets during the periods of 2012-2013 and 2016-2018. In every case, when red trend-line was penetrated, it followed by multi-year extreme rise in price of Bitcoin. Moreover, you can see that after periods A and B, there was a rapid surge in price, followed by a higher low which defined the trend-line of the upcoming bull run (Black lines on the chart).
When I first applied the black and red trend-lines on this chart, I saw that every new line becomes less and less steeper, while at the same time the time frame becomes longer. Interestingly, a Fibonacci sequence can be applied to measure the progression of the amount of time it takes to complete each new phase of the market.
As you can see on the chart, a simple measure of the first bear market was good for predicting the start and finish of the bear market in 2014 and the start of most recent bear market back in 2018. If this pattern continues to play out, we should expect the longest bear market in Bitcoin’s history, which will last for two more years.
To me, such view is realistic in the face of the current macroeconomic events. Yes, cryptocurrency is a challenge to contemporary monetary system, and yes, the system is broken. But during an economic crisis, people need protection in the first place. People are losing jobs, they have little savings and big families to feed. Why would anyone gamble on Bitcoin when they aren’t sure whether they will have enough money to feed themselves in the coming months or years?
Bitcoin’s fundamental value was based on two narratives: safe haven asset and innovative method for transacting. However, its extreme volatility contradicts both of these statements. Asset cannot be considered safe if it can lose 50% of its value in 1 day (as in March 2020), or lose 80% of its value in one year (as in 2018). As for the second, have you tried using Bitcoin for making a real world transaction? From the moment someone sends you money to the moment when you receive physical cash, the value of the transaction is already decreased by 5-8% due to the fees, and if you bother selling it to fix the price, the value can either increase or decrease by mere 5-10% as result of speculation. It is extremely inconvenient.
The only people who now support Bitcoin are the people who hold some. They want you to buy Bitcoins so that it lifts the price and they become richer. They will tell you about mysterious halving and its effect on supply, but price is dependent just as much on demand. And in current economic situation, demand is going to decline significantly.
This method suggest that when a trend-line is penetrated, the trend is no longer active and has reversed. Such trend-line violation defined the start of primary bull markets during the periods of 2012-2013 and 2016-2018. In every case, when red trend-line was penetrated, it followed by multi-year extreme rise in price of Bitcoin. Moreover, you can see that after periods A and B, there was a rapid surge in price, followed by a higher low which defined the trend-line of the upcoming bull run (Black lines on the chart).
When I first applied the black and red trend-lines on this chart, I saw that every new line becomes less and less steeper, while at the same time the time frame becomes longer. Interestingly, a Fibonacci sequence can be applied to measure the progression of the amount of time it takes to complete each new phase of the market.
As you can see on the chart, a simple measure of the first bear market was good for predicting the start and finish of the bear market in 2014 and the start of most recent bear market back in 2018. If this pattern continues to play out, we should expect the longest bear market in Bitcoin’s history, which will last for two more years.
To me, such view is realistic in the face of the current macroeconomic events. Yes, cryptocurrency is a challenge to contemporary monetary system, and yes, the system is broken. But during an economic crisis, people need protection in the first place. People are losing jobs, they have little savings and big families to feed. Why would anyone gamble on Bitcoin when they aren’t sure whether they will have enough money to feed themselves in the coming months or years?
Bitcoin’s fundamental value was based on two narratives: safe haven asset and innovative method for transacting. However, its extreme volatility contradicts both of these statements. Asset cannot be considered safe if it can lose 50% of its value in 1 day (as in March 2020), or lose 80% of its value in one year (as in 2018). As for the second, have you tried using Bitcoin for making a real world transaction? From the moment someone sends you money to the moment when you receive physical cash, the value of the transaction is already decreased by 5-8% due to the fees, and if you bother selling it to fix the price, the value can either increase or decrease by mere 5-10% as result of speculation. It is extremely inconvenient.
The only people who now support Bitcoin are the people who hold some. They want you to buy Bitcoins so that it lifts the price and they become richer. They will tell you about mysterious halving and its effect on supply, but price is dependent just as much on demand. And in current economic situation, demand is going to decline significantly.
כתב ויתור
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