Bitcoin Cycles and Predictions
Right after rejoining crypto after my absence since late 2014, in May 2017 I had a brief idea in my head that there was some sort of hidden cycle happening with bitcoin. My idea at first was that it was somehow possible to predict what was going to happen in the future by looking at time cycles. I eventually ignored it since I only had 2 data points to work with.
So I would like to flesh out what my prediction at the time was, how far off it was, and the methodology I used to reach it. Additionally, with the benefit of hindsight, how the latest bubble changes any future predictions by adding an extra data point to work with.
TLDR: In May 2017 I predicted that Bitcoin would reach around $16k by late June 2017 based off simple calculations. I was -7.8% and -11.15% off respectively compared to what happened in reality. According to the same methodology, the next bubble will be between October 2021–May 2022 and the all time high price will be between $53k-$62k.
My old calculation
At the time, I started by looking at the first 3 bitcoin bubble events and more importantly the timing between them so as to determine a “ratio”.
The first bubble I define as having been in 2011. So the first event we can look at is between the first two bubbles. The last all-time-high (ATH) had been on June 8th 2011 ($28,92), and the next ATH after that ocurred on April 9th 2013 ($230). The time between these two ATHs was 22.03 months. Additionally, the time it took to reach the previous ATH of $28.92 after the crash was 20.36 months. If we divide 20.36/22.03 we get the first ratio of 0.924
The second data point begins with the input from the former one. The last ATH was on April 9th 2013 ($230) and the next ATH is on December 4th 2013 ($1147.25). The time between these two ATHs is 7.8 months. The time it takes to reach $230 again after the crash is 6.9 months. The new ratio is 6.9/7.8 or 0.885.
Now at the time that I first did this calculation, it was May 2017, and bitcoin had just reached 2x its last peak, so it was possible to make a preliminary calculation. I rounded up the last ratio of 0.885 to 0.9, and the first one from 0.924 to 0.9 as well, so it seemed that 0.9 was a recurring “emerging” number (mind you, a key and big assumption).
Therefore, by knowing the ratio (0.9) and the time it took the price to reach $1147.25 again after the first ATH (38.57 months), the end result was that the next bubble ATH would occurr at 38.57/0.9 or 42.85 months from the previous ATH, or simply, on June 25th 2017. In reality, we know the ATH ocurred in December 11th 2017, or 48.23 months from the previous ATH. So I was -11.15% off. It’s not bad for a back-of-the-envelope calculation, but not particularly precise either.
What about the price? My hypothesis then was that I could plot a parabola aproximating the ATHs, and I already had 3 points to plot the parabola with. The graph would have the x axis as the time in months, and the y axis as the price in dollars following the previous graphs shared here. The first point would be (0,28.92), the second point would be (22.03,230), and the third point would be (29.83,1147.25). This 29.83 months is resulting from the sum of 22.03 months (time between the first bubble ATH and the second bubble ATH) and 7.8 months (time between the second bubble ATH and the third bubble ATH). Once the three points are clear, I simply calculated the parabola equation using the following website.
So now we can solve for y and figure out the price. The x value is of course all the months that have passed since the ATH of the first bubble way back in 2011, until the time that it was calculated the next ATH bubble would occur, in June 25th 2017, or 29.83 months plus 42.84 months which equals 72.68 months. Once we start solving we get y = 4.2 (71.68)² -83 (71.68)+28 = $16181,56. That’s only -7.8% off from what actually happened. Of course I didn’t know that at the time. For me it seemed like a fantastical number, and I had little confidence on my calculations, so I dismissed it as nonsensical but nonetheless stuck around the space as I was filled with curiosity on what was to come.
Last bubble calculations
With the last bubble (2017) now clear and gone, it ocurred to me to revisit my old math and see what new information this last bubble would bring.
The previous ATH was on December 4th 2013 ($1147.25) and the second ATH was on December 11th 2017 ($17549,67). The time between these two ATHs is 48.23 months. Additionally, the time it took for the price to reach $1147,25 again was 38,57 months. Thus, if we divide 38.57/48.23 we get the last ratio, or 0.7997.
Initially when I just had the two data points I thought the ratio was always constant and 0.9 (by rounding 0.885 & 0.924 to 0.9), but now it seems more like there could be a trend of diminishing ratios. The decline from the first ratio of 0.924 to the second of 0.885 is of -4.22%. But the decline from the 0.885 one to 0.7997 one is of -9.64%, or 2.28436x the decline.
If (another big assumption that’s probably wrong incoming) this rate of decline is constant, that means the next reduction in the ratios would be -22.021% (9.64 x 2.28436) and the resulting ratio between “time in months to go back to former ATH from previous ATH” divided by “time between two new ATH” will be 0.623598. This means, as soon as bitcoin hits close to 17k again we would be able to guesstimate the time in months until the next ATH is reached, and also its value.
Predictions
It is still possible to extrapolate a prediction based off that ratio alone. The ratio of 0.623598 can be expressed as the fraction 31.1799/50, where 31.1799 is time in months to go back to former ATH from previous ATH and 50 is time between two new ATH.
Given this, we would get the following results:
• BTC will hit $17549,67 again on 16th July 2020
• BTC will reach a new ATH by 11th February 2022
• That new ATH will be $58276,347
Since the application of this “model” was off by 11.15% in terms of dates and 7.8% in terms of price, we can then adjust the results above to produce a range of possibilities, where:
• BTC will hit $17549,67 again somewhere between 24th March 2020 and 3rd November 2020
• BTC will reach a new ATH somewhere between 23rd October 2021 and 28th May 2022
• That new ATH will be somewhere between $53730.79 and $62821.9
In theory…
However, I remain incredibly skeptical that it is possible to predict in any meaningful way the future price just looking at old prices and time. There’s just too many variables in motion that are affecting price and the time it takes to reach it that are not taken into account in such simple calculations.
I did more calculations exploring all the possibilities and I have produced a graph with all the information for others to verify and also as a way to backcheck the information in the future for fun. It was a fun 2 days going down the rabbit hole of math and prices and times, but I wouldn’t put much weight or importance on the results or predictions resulting from this exercise.
