The Final Bitcoin Pump
TL;DR: Revisited prediction from 2019 with latest data, was 5.8% off, and new prediction is that BTC will hit a new ATH somewhere between 11th of May 2022, and 20th March 2023, BTC new ATH will be somewhere between $62933.68 and $73581.9. The future however does not look so bright. Of concern is the fact that bitcoin’s price moves indicate there exists a hard ceiling that is fast approaching.
Two years ago I wrote a now somewhat prophetic prediction, itself based on a previous sketch of a prediction, that seemed to loosely predict Bitcoin (BTC)’s future cycles, of all time highs and all time lows.
Let’s begin with revisiting the predictions of 2019 and how they are faring so far as of February 2021.
Prediction 1:
BTC will hit $17549,67 again somewhere between 24th March 2020 and 3rd November 2020
Using the same website for the price checking as in the previous article, we see that Bitcoin reached (as close to) this price on the 17th of November 2020
Already here we see the model was off, though not by a lot. A year has 365 days, and I was 13 days off from a prediction range of 224 days, or 5.8% off. That really isn’t too bad considering how crude this “model” is.
Prediction 2:
BTC will reach a new ATH somewhere between 23rd October 2021 and 28th May 2022
As of the date of this writing, the 23rd of February of 2021, Bitcoin continues to push new all time highs every week. This prediction refers specifically to the absolute top of price before it retraces significantly back down (I would say significantly here would mean at least in the range of -30% to -50%). Therefore this we will only find out in hindsight.
Prediction 3:
That new ATH will be somewhere between $53730.79 and $62821.9
As of the 19th fo February of 2021 we have already entered this range, as you can see below:
Considering the model was already off by almost 6% in terms of revisiting the previous ATH, it is fair to assume it might be off on a similar or greater level for this. If BTC were to crash already from these levels, the model would be off significantly, as I had predicted the top would occurr at the earliest on the 23rd of October of 2021, meaning we are 8 months “ahead of schedule”. However, we are getting ahead of ourselves.
One step backwards
The predictions above were made by extrapolating off a ratio alone, rather than the previous method I had used which required the data I didn’t have at the time: how much time until BTC would go back to it’s previous ATH of 17k. Now we have that data, let’s recalculate and see what we get. First, the time between ATHs is 37.2 months (I am using the following website to calculate between dates):
According to what I wrote in April of 2019:
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.
So the formula then becomes:
37.2 months / Time between two new ATH = 0.623598
Solving means the next ATH would be 59.65 months from the first ATH on the 11th of December of 2017, or the 30th of November 2022. Assuming again a “confidence” percentage of +-11.15% we then get the following range:
BTC will hit a new ATH somewhere between 11th of May 2022, and 20th March 2023
Using the same parabola formula as last time, we get that the ATH price would be $68257.79. Assuming again a “confidence” percentage of +-7.8% we then get the following range:
BTC new ATH will be somewhere between $62933.68 and $73581.9
Time will tell how accurate (if at all) this will be. In the meantime, a more curious question occurred to me.
Back to basics
The accuracy of a model is only as good as it’s assumptions, and in the exercise above there are plenty of assumptions that might be incorrect: the percentages used to calculate the ranges, the parabola itself that fits the data, the assumptions of the rates of “ratio-change”, etc.
While it might be enough for those curious that I roughly get the predictions in the “right ballpark”, there was something about the raw data that unsettled me. And that was the original first ratio I calculated:
The ratio of the time between the old bubble ATH to be reached again, divided with the time between 2 new bubble ATHs
This number, this ratio, kept decreasing with each cycle. It started at 0.924 , then 0.885, then 0.7997, and if my forecast is at all accurate, the next number would be 0.623598.
What does it mean, that this number keeps decreasing? And what happens when it approaches 0? This is the real question that made me write this article.
Well, the number decreasing means that in each new cycle, the price is taking less time to recover to the previous ATH, or that it’s taking more time to reach a new ATH, or both.
Closer and closer to zero, we would have a scenario where the time between past ATH and the price catching back to it would be an extremely small number, meaning the price would have plateaued. And the time between 2 new ATHs would be an extremely high number, meaning BTC would never again exceed that price. In short: the price of BTC would hit a hard ceiling.
When we plot the ATHs and Bottoms of Bitcoin, with the respective time between them, we start seeing this (last point is a forecast):
Now, this would all be fine and dandy if not for one crucial detail: what attracts people the most to bitcoin and the cryptocurrency ecosystem at large is the prospective of gaining riches. And if suddenly there is no prospect of riches, demand would drastically fall. So far, bitcoin has failed to gain any meaningful utility other than speculation, as evidenced by it’s lack of use as a both a medium of exchange and predictably reliable store of value, which was something entirely predictable based on its supply schedule; the expectation of scarcity creates a disincentive to spend, and creates volatility that is useful only for speculation and not for financial planning.
If the price increases were coming from a more stable source, that had no relationship to price, such as a demand for retail transactions, then it would be a different story. But because of the recursive relationship between price increases and speculative demand, one can fairly reliably induce that once the exponential growth slows down, the whole thing will collapse through a positive feedback loop that amplifies its descent.
When we really think about it, it makes perfect sense that Bitcoin’s price couldn’t just keep going up forever, no matter how much demand there existed for it. Something can’t double in value for very long before it requires more value than exists on earth. In fact, no component part of the economy can grow faster than the overall economy indefinitely, eventually it would grow to the point where all economic growth is coming from that one component, which in this case would lead to the absurd situation where nothing else in the economy is growing except for bitcoin. And this isn’t sensical for a trade token, the token can’t become more valuable unless there is more value to trade for it.
So, while the current bitcoin pump might not be the last, there will be a last. My guess is there could be room for 1–2 more pump cycles, but considering that the time itself between ever increasing bottoms and ever decreasing tops will be extended, I have not found a good way so far to make any sort of guesstimate. The closest we could use to predict that there will be at least 1–2 more pumps is to look at the ratio (top part of the first image of this article):
If the x2.28436 factor continues, then the next ratio decrease will be of -50.3%, giving that the ratio will go from 0.623598 (which is still a forecast as of this writing) to 0.31367. After that, the next ratio decrease will be of -114.9% which would mean we would have exceeded zero into negative territory, when I believe it’s more likely that it will approach zero but never reach it. At that point the whole system is firmly unsustainable, so the collapse must necessarily happen before.
All in all, there is even more uncertainty this time. So the only thing I think I shall do instead is to stock up on popcorn for the upcoming fireworks.
