The Bitcoin halving was almost exactly 6 months ago and although we can already see a positive development in the Bitcoin price, the big “wow effect” is still missing for many. The old all-time high is still a long way off, so many people still ask themselves: When moon?
Benjamin Cowen, founder of Into The Crypto Verse , addressed this question by taking historical BTC price data from the past decade and drawing five key conclusions with the help of data science and predictive models. With the help of this knowledge, participants should be able to better assess which market cycle we are currently in based on the current Bitcoin course.
When moon? Well, so much can already be revealed at this point: You probably don’t have much time left to amass BTC at these prices.
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Decrypt Bitcoin course with the help of data
Investing in Bitcoin over the past decade has dwarfed the returns of most other investment vehicles.
While a quick look at the Bitcoin price over a short period of time can still look a bit daunting, according to Cowen this is because short-term price movements are best traced back to a random walk or a geometric Brownian movement.
Traditional technical analysis, in his opinion, is often riddled with waivers at every turn, and for any kind of price movement that resembles some kind of textbook pattern, there are countless others that don’t go “according to plan”.
Alternatively, a macro view of the Bitcoin price development gives something that can be deciphered a little better with the help of data science. A quick analysis shows that there are market cycles that have resulted in lower ROIs, while the realization of these ROIs takes longer. In simpler terms, it means that BTC’s macro trend shows an increase in cycles with decreasing ROIs in each market cycle.
In cases in which an annual loss after a speculative bubble can exceed 80%, there is much to suggest that not only the time in the market, but also the timing of the market is important.
The time value of money is crucial in an era when it comes to defeating inflation
1. Bitcoin course is in a “fair value” phase
The above graph shows the price of Bitcoin and a logarithmic regression fitted to “non-bubble” data and speculative bubble peaks. If the price is viewed from a high level, areas of accumulation and speculative bubble formation can be identified much more easily.
To better understand these trends, we can calculate the percentage difference between the Bitcoin price and the logarithmic fair value regression fit, which is a monotonically increasing function (Fig. 2).
2. Market cycles become less explosive
The graph below shows that speculative bubble formation with respect to the fair value regression band becomes less and less explosive with each subsequent peak.
In fact, the percentage difference between the first peak in the Bitcoin price in 2011 and the logarithmic regression band is around 6,000%, while the second peak in 2013 is only around 3,000% above the band.
The third speculative bubble in 2017 peaked about 1,000% above the regression band. While three data points certainly cannot establish a definitive trend, we can at least speculate with the data we have so far. For example 6000/3000 = 2 and 3000/1000 = 3. If this trend continues (which is of course a big “if”) and we see a division by 4 from the third bubble to the fourth, we can expect the Bitcoin Course will be overvalued by about 250% in about three more years (2023).