Probably many of us are facing that question.
My view of Bitcoin and my recent trading story
I personally consider myself... quite unlucky. I mean I believe in bitcoin - I believe it will generally continue to increase its value... so actually I'm happy when the price goes down because I see it as an opportunity to buy.
So when it reaches one of its lower lows with a price of about 3,300 Euro (trading mostly on COINBASE I trade mostly to EUR, not USD, but it just means slight conversion 1$ = 0.85 Euro) I wasn't afraid. I wanted to buy. Unfortunately, I didn't have many funds on the exchange at that moment, and when they arrive the price already recover to about 6,000 Euro. Still not bad compared to what we have now, but of course, I did some trading during the way - with selling and then buying at a lower price. With last buying transaction for 14,000 Euro, and with realizing some profits about a month ago for 17,000 euro... so incredibly low now it seems to be. I did earn some money but still, to lose profits I could have pains...
I thought the price will get a major dump. So I will get to buy before the great bull run for something about 10,000 Euro... but that didn't happen. Bitcoin reached its ATH. And I have just a little bitcoin at that time. I never was a "big trader", my savings for investing in cryptocurrencies aren't very big, and for now constant. I have just about 190 euro available for investing, what's translates to slightly above 200$. That's not a fortune, so perhaps I shouldn't care for this that much. But still, I would like to make the best investment with what I have.
And now I know, that I could just buy at 20,000 euro for all my cash and gets over 50% of profits. But now such a price seems like an unreachable dream...
with Ethereum it's similar. I realize my profits with about 60% of my Ethereum, selling it for 400 Euro. Now it's over double that prices... and similarly after it started to reach bigger and bigger prices I could earn some decent profits too... but this post will be mainly on Bitcoin.
So here comes the question: buy or not to buy.
The current situation
I know many people are probably buying now like crazy from FOMO. I never wanted to fall into this trap. But it turned out It will be beneficial if I could, so maybe fear of FOMO is bad too? As I say I would already have over 50% profits. Now anywhere below 30,000 Euro seems like a good price to buy... but not so long ago most of us were asking if we can reach 20,000$... but will this uptrend continue? No one knows...
This what I know is that many times some said about "the price will soon go down", and that's one of the factors that keeps me from buying more bitcoins. I also hoped the price will go down. And perhaps those crypto Youtubers also just hoped for that? But would they say it again and again if it wasn't going to happen? Well, the question is when it happened. And from what price will it fall down. It doesn't have to fall below 17,000 after all...
So even if we would go in right now, how do we know when to go out? How high will this ATH eventually be? There is high demand right now, official investors, banks, companies, all are buying bitcoins right now, so it could continue for quite a while.
But as far as I know in the last big bull run in 2017 there was one major dropdown, before going to the final ATH. So will the story repeat? I think so. Today I did watch a video from one of the Polish crypto Youtubers, claiming the price can now go up to 60,000$ or even about 80,000$ and then drastically go down. Then I think we will have the main part of the current bull run which will lead us to the final ATH. Of that cycle of course... but how high it will eventually go? Or maybe this 80,000$ will be the final limit and we don't see higher prices before the next cycle...
My own Heuristic for BTC price limit
In my research around the bitcoin price limit, I thought "Hey, bitcoin ic cyclic right? So how was the previous ATHs?". Actually, I notice 2 major ATHs. As ATH I counted the Highest reached price after which it goes again to - relatively very low prices, 1 ATH for 1 cycle. So if for example, it would reach now 40,000$, goes down like 30-50%, and then reach 100,00$ I would count just this 100,000$. Another important factor is also how I choose a value for the bottom. It's the lowest price after last ATH, no matter how
What were the major ATHs?
The first was on 29 November, in 2013. Bitcoin reached 1242$ and then dropped to a price level of about 340$ it was about 72% drop! (I will refer to it as 1st ATH)
But it pales compared to 18 December of 2017, when the price rose up to 19783$ (the highest price I noticed on the charts, though some sources said jut about 19,498$). The drop reaches even about 3500. Yeah, I say about the Corona Crash. Counting it the drop was even bigger: 82%. (I will refer to it as 2nd ATH )
The problem with it is - we have just 2 points that way. Well, 4 if we count the dumps but what I wanted to examine is relations of consecutive ATHs. And with just 2 points? What kind of relationship we should assume? Linear? Exponential? Of course, there are many factors, like halvings, different events that can push the price up or down... so some better heuristics could be done with that method AFTER the current cycle and its ATH. (I will refer to this as current ATH)
Linear version
We can still check what can be estimated with just these 2 points, though. So let's first go with linear assumption. But linear to what? That a good question... I think that the best choice would be time. After all the price chart is for price in time.
So the first step will be calculating the step - so how much per period of time (I decided to go with months) the price is growing from one ATH to the next. Between the 1st ATH and the 2nd ATH, we have about 49 months, and the price difference is 18,541$, so it gives about 378$ per month. I know it isn't constant growth, but it's rather an assumption about: the further from the previous ATH, the higher the next one will be, not growth being constant. And how long ago was the previous ATH? Well, it soon will be 37 weeks, all we have to do now for this heuristic is to take the previous (2nd) ATH and multiply the step by the distance between the current ATH and the previous one. So we get 19783+378*37=33769 - that's of course the price in USD. And what's the price now? Let me look... Coinbase Pro show over 40,500$ right now.
What can that mean? Well, 2 things:
First: this heuristic is completely worthless, and was just a dead end in my research. Or sign I should use more advanced tools than just playing with simple math and generalization.
Second: as the price exceeds what it should reach (the demand is much higher than in the previous ATH, so it could be the reason of behavior different than expected...) so soon we can expect a big drop down and finish of this bull run an entire cycle...
Exponential version
But there is another approach we could take. Exponential. Which, as you can expect will lead to much higher predictions (so the current price surely will NOT exceed it). But in what way exponential? Well, one approach could be "let's take some number(base), and then rise it to next exponents to get next ATH"... but how to find this number? It will be complicated... but there's some nice feature of the exponential function. Let's look at such sets of 4 numbers. First: 1, 2, 4, 8; second: 1, 3, 9, 27... ok so actually we don't know how the number, we just know there are numbers for consecutive exponents (yeah, I know most of You probably guessed the bases are 2, and 3, this example was intended to be simple) when we divide one number by the previous (for example 4/2-2) we can use the result to find out the next number (4*2=8, and 8*2=16... and that really is what next number should be).
With the price... can we just use the number of ATH as our exponent? So don't care if between consecutive ATH the time is the same or not? Well... perhaps. Or perhaps we shouldn't...
Firstly, go with the easier way. So how much time price goes from the 1st ATH to the 2nd ATH? ALMOST 16 times! (exact number from my calculations is: 15.92834138) so as You expect it will lead us to REALLY big numbers... and what that number is? Well, it's about 315,000$! That's a really high price! Could we really see something like that? If this would be true that would mean that even now going all-in would be a great idea! But we don't know if it's true.
But we know, that 37 weeks is less than 49... so if we take 49 as our "unit" of how exponent change then we wouldn't have the whole unit till now - so just multiplying by whole unit, just 37/49 of it! So what are we gonna do now? Just multiplying the number representing how many times it differs wouldn't do right? So what would do?
Well, the reason we could just use the result of that division was simple. If we had x^(k+1)/x^k the result will always be x^(k+1-k)=x^1=x So it's the actual number we were looking for. And now we got not k and 1, but 1 and 37/49, so x^(1+37/49)/x^(1)=x^(1+37/49-1)=x^(37/49). The x is our number calculated in the easier example so 15.92834138. We just need to rise it to the power of 37/49... wait, what? How Can You do that? Well, actually it will be like a rise to the power of 37 and then a root of 49. That would be long and boring calculations... but computers can easily do it for us, giving us the final result of about 159975$ (see? The time was just in about 3/4 of previous but it's about 2 times less than with easier option) And even if we take next months in this quarter of the year (and the current bull run isn't supposed to last longer) it will not exceed 180,000$. There were people who said that bitcoin will reach about 100,000-200,000$ as new ATH, so it seems much more convincing. And with that limit investing now still seem to be a good option. Is this prediction correct only time will show.
Comparing results to more advanced models
But those before were all just some heuristic and more of a thought experiment, than actual price analysis. So how it relates to some more advanced indicators? I think one of the most important to predict long-term bitcoin prices is the stock to flow model. It's a logarithmic chart and it shows that in the long run bitcoin really is quite cyclic look at how it looks like now:
As You can see, the colorful dots are bitcoin price (color depends on how much time it is to next halving), and this brownish line is stock to flow 365 days moving average(it's a model, so it HAS values for the future too - this line at the bottom (variance) shows how much id differ from the actual price). And this horizontal line (which I get by moving the cursor to the stock to flow MA line at the date when it reaches this value) is more or less showing where at maximum should be the current ATH (so ATH we will eventually reach in this bull run) - as You can see is about that same higher than the brownish line as the previous ATHs (which I also showed on this chart).
It seems quite consistent with the heuristic I did! Actually, it even favors the higher one! Though the lower still seem quite likely looking to that chart.
So what do You think? How high will bitcoin rise? When and how much it will dump?
The stock to flow chart comes from https://www.lookintobitcoin.com/charts/stock-to-flow-model/ and was edited by me personally.
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