Simple price analysis and metric correlations

[Anastasios]

I have seen several threads analyzing the exponential trend but not any analysis in bull markets and bull/bear scenarios. In this thread I will share my simple price analysis and metric correlation for bull markets. I have succeeded in forecasting the bull/bear scenarios since the April 2013 bull market. I use elementary mathematical methods and then I make use of some other metrics which correlate with bull markets.



Timing correlations
There seems to be a set cyclical pattern on the timing of bull markets. The definition of a bull market in this thread is an uptrend lasting over a month and moving the price up a lot. The following bull markets have occured:

• #1) June 2011 bull market going from $0.8 to $32
• #2) January 2012 bull market going from $2 to $7
• #3) August 2012 bull market going from $5 to $15
• #4) April 2013 bull market going from $13 to $260
• #5) November 2013 bull market going from $125 to $1175
• #6) June 2014 bull market going from $425 to $675
• #7) March 2015 bull market still ongoing from $166 to $300?
• #8) November 2015 bull market going from $230 to $500
• #9) June 2016 bull market going from $450 to $780
• #10) Predicted late 2016/early 2017 bull market, possible ATH?

There is an obvious cyclical correlation. Each bull market is 7-9 months apart. During these bull market occurs the only lasting bull markets. The rest of the time, BTCUSD is constantly in a bear market. The bull markets which reach a new ATH are henceforth called high magnitude bull markets. They occur approximately half of all the times and they are the ones we are interested in analyzing.



Analysis of increase ratio between high magnitude bull markets
Bull market  Peak                   Increase ratio from previous bull market     Increase ratio of increase ratio      
#1              32                    
#4              260                     8.125          
#5              1150                   4.4231                                            0.5443786
#10?           2300+?                2+?      
 
The increase ratio of the increase ratio (the second derivative) seems to be approximately one half. This means that the increase ratio of bull market #x will be approximately 0.5*((#x-2)/(#x-1)). I'd make a graph but its easy to visualize what is going on here.



Price increase factor analysis
Bull market  Start   Peak      Price increase factor    Increase ratio of price increase factor        
#1              0.8      32         40          
#4              13.5    260        19.25925926              0.4815
#5              125     1150       9.2                          0.4777
#10?           600?    2400?     4?
 
The increase ratio of the start and the peak of a bull market seems to follow a pattern too.



Metrics correlated with high magnitude bull markets
Metrics correlated with successful bull markets are:

• Google trends http://www.google.com/trends/explore#q=bitcoin
• Number of transactions https://blockchain.info/en/charts/n-transactions?showDataPoints=false&timespan=all&show_header=true&daysAverageString=1&scale=0&address=

These metrics show that high magnitude bull markets correlate with increased usage of bitcoin and a sharp increase in media mentions. The downside with these metrics is that they lag behind usually, or at best follow the price.



Future prediction
My prediction is that in the future the increase ratio will converge downwards. The same goes for the price increase factor. The forthcoming high magnitude bull markets will take us up to higher and higher 4 digit numbers until it no longer drops to 3 digits after the bear market. New ATHs may then be $1000 higher than the previous one but the increase ratio closer to 1. Beyond that these cyclical patterns should cease as price becomes more stable and behaves like other assets, e.g. gold. Even though gold has very similar patterns, they take over a decade to complete.

The only thing I believe may impact timing as of now is that there might not be an anticipation bubble starting before the halving. Instead there may be a delay on the onset of the bull market. Due to the halving there will be a very noticeable effect on the supply of new coins, since as we know the large mining operations (which make up almost all mining) sell the coins. On another note the price is behaving exceedingly similar to post august 2012 bubble, where the gains of the bubble remained and the price did not move downwards. This is vastly different from most scenarios with bitcoin where it seems to be in a constant negative trend.

Inputs welcome!

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[SmoothCurves]

Great post.

However, I couldn't help but wonder why you didn't mention the block reward halving. It seems like each block reward halving could boost (or reset to a degree) the Price increase factor.

[Anastasios]

Great post.

However, I couldn't help but wonder why you didn't mention the block reward halving. It seems like each block reward halving could boost (or reset to a degree) the Price increase factor.

Of course the price increase factor occurs due to a surge in users buying bitcoin, great enough to wipe out the ask orders on exchanges. The decreased inflation of reward halving does have an effect on the price but I can't correlate it with the timing of the bubbles. A bubble may occur in anticipation of reward halving as well as due to its after effects of diminished supply. I would not use it as a metric. I would rather claim that the fixed supply of the amount of bitcoins is what makes it's price rise in relation to fiat.

[stonerider]

Bitcoin halfing has no bearing on the price action on the market. At best, it gets priced in 6 months prior to halfing. Look at the timeline above. During late 2012 (Oct, Nov, Dec) when it halved, there was no bubble.

[The Bitman]

I would not automatically assume that just because there is a block halving this correlates to the price movements within bitcoin. I think that's actually quite naive to think.

[SmoothCurves]

Bitcoin halfing has no bearing on the price action on the market. At best, it gets priced in 6 months prior to halfing. Look at the timeline above. During late 2012 (Oct, Nov, Dec) when it halved, there was no bubble.

I agree that effects of the halving dont appear to be instant. Tho i am skeptical about the claims that it gets priced in or that it doesnt play a key role in these large bubbles after a few months once the supply side starts to feel the decrease in supply. We''ll know for sure in 2021 when we have more data points.

[Anastasios]

Rereading this thread, I am happy with the way it has been written. I am also happy that I seemed to have clocked the timing of the cyclical nature of bitcoins bull and bear markets. It has been 9 months since the last notable bull market, which is in line with this threads analysis.

I am updating this thread with this post because I am suspecting we are in a bull market that may lead to a new ATH (a "high magnitude bull market").

Observe that google trends shows that this month bitcoin is more popular than many previous months, despite only 7 days having passed. https://www.google.com/trends/explore#q=bitcoin

Observe also that there is a spike in the number of transactions: https://blockchain.info/sv/charts/n-transactions?timespan=all&showDataPoints=false&daysAverageString=1&show_header=true&scale=0&address=

All the metrics are showing the signs of an emerging high magnitude bull market.

Edit: This is bull market #8.

[Anastasios]

On a side note, I hope this does not turn out to be a low magnitude bull market. If it does though, we would have to wait until the next cycle to see if it comes.

Now that the forums are more active, I hope more people chime in for a discussion on the basis of this analysis and some input/feedback on the analysis.

[SmoothCurves]

On a side note, I hope this does not turn out to be a low magnitude bull market. If it does though, we would have to wait until the next cycle to see if it comes.

Now that the forums are more active, I hope more people chime in for a discussion on the basis of this analysis and some input/feedback on the analysis.

So you're saying the new ATH will be in the 1k-3k range?

[Anastasios]

On a side note, I hope this does not turn out to be a low magnitude bull market. If it does though, we would have to wait until the next cycle to see if it comes.

Now that the forums are more active, I hope more people chime in for a discussion on the basis of this analysis and some input/feedback on the analysis.

So you're saying the new ATH will be in the 1k-3k range?

Yes, I believe the next bull market will be in that range. 1.5-2.5k more specifically.

This seems to be a low magnitude bull market. Price went up by over 200% anyway. Let us wait another 7-9 months and see what happens, which coincides with the reward halving.

[HostSurf]

Nice analysis

Hope you're right, would be really good for bitcoin holders

[Anastasios]

Updated first post. I wonder if people do not believe a new ATH is imminent soon...

[Anastasios]

Speaking of commodities, look how the price of gold behaves similar to bitcoin, except that the last bull market lasted a decade!

[Fakhoury]

Updated first post. I wonder if people do not believe a new ATH is imminent soon...

Speaking of commodities, look how the price of gold behaves similar to bitcoin, except that the last bull market lasted a decade!

Hello Anastasios,

First, thank you so far for this great thread and the ELI5 easiness

Second, would you please share with us your view regarding Bitcoin price in the coming 10 - 15 years ?

Third, could you elaborate about the similarities of Gold and Bitcoin in price behaving, I'm afraid that we will take the same path which means we will take 20 years to start going off !!

[Anastasios]

Updated first post. I wonder if people do not believe a new ATH is imminent soon...

Speaking of commodities, look how the price of gold behaves similar to bitcoin, except that the last bull market lasted a decade!

Hello Anastasios,

First, thank you so far for this great thread and the ELI5 easiness

Second, would you please share with us your view regarding Bitcoin price in the coming 10 - 15 years ?

Third, could you elaborate about the similarities of Gold and Bitcoin in price behaving, I'm afraid that we will take the same path which means we will take 20 years to start going off !!

I am happy that my thread has come to use for you. I did not intend to make it ELI5 type but I am specific when explaining and don't like ambiguity so I tried making everything clear.

Price in 10 years? I look at the long term growth chart on a logarithmic scale.


You'll see that I base my estimate (the green line) on the lower ends of the price, historically. And you can also see that the green line looks like a logarithmic function. This also coincides with my belief that it takes longer for the price (and bitcoin itself) to double in size the more times it has doubled. Obviously in late 2010 you could move the price with little money. Now you need several millions in USD to move it a couple percent.

Yet still sometimes I doubt the really high figures. The $10k estimate in the chart above is optimistic. It may be hit much later. Either way I believe eventually bitcoin will be used much, much more than now, which means the demand for coins will be high. It is simply a technological breakthrough. But estimates of $1 million per coin I believe are too high. Eventually new breakthroughs will come along. Am I permabull? Actually, I think bitcoin has been excellent to hold. But I believe it is going to act like a commodity like gold over time. The long term trend is always up since fiat money is always printed. But buying at the wrong time can put you in a losing position for a long time. So I think one will have to be conversant with technical analysis, the current sentiment, and have a good sense of timing it - knowing when to buy and when to sell. And during the bullish times great profits are to be had!

Regarding the behavior similarities with gold in regards to price, look at the chart of gold. In the 80s a bubble occurred which lasted a couple years and then it corrected and stagnated for two decades it seems. Then it finally got in a bull market, which lasted 10 years, and then corrected itself. The similarities are that the price shoots up and goes parabolic, then corrects and stagnates for a longer period. Just look at the appearance of the chart.

[Fakhoury]

Updated first post. I wonder if people do not believe a new ATH is imminent soon...

Speaking of commodities, look how the price of gold behaves similar to bitcoin, except that the last bull market lasted a decade!

Hello Anastasios,

First, thank you so far for this great thread and the ELI5 easiness

Second, would you please share with us your view regarding Bitcoin price in the coming 10 - 15 years ?

Third, could you elaborate about the similarities of Gold and Bitcoin in price behaving, I'm afraid that we will take the same path which means we will take 20 years to start going off !!

I am happy that my thread has come to use for you. I did not intend to make it ELI5 type but I am specific when explaining and don't like ambiguity so I tried making everything clear.

Price in 10 years? I look at the long term growth chart on a logarithmic scale.


You'll see that I base my estimate (the green line) on the lower ends of the price, historically. And you can also see that the green line looks like a logarithmic function. This also coincides with my belief that it takes longer for the price (and bitcoin itself) to double in size the more times it has doubled. Obviously in late 2010 you could move the price with little money. Now you need several millions in USD to move it a couple percent.

Yet still sometimes I doubt the really high figures. The $10k estimate in the chart above is optimistic. It may be hit much later. Either way I believe eventually bitcoin will be used much, much more than now, which means the demand for coins will be high. It is simply a technological breakthrough. But estimates of $1 million per coin I believe are too high. Eventually new breakthroughs will come along. Am I permabull? Actually, I think bitcoin has been excellent to hold. But I believe it is going to act like a commodity like gold over time. The long term trend is always up since fiat money is always printed. But buying at the wrong time can put you in a losing position for a long time. So I think one will have to be conversant with technical analysis, the current sentiment, and have a good sense of timing it - knowing when to buy and when to sell. And during the bullish times great profits are to be had!

Regarding the behavior similarities with gold in regards to price, look at the chart of gold. In the 80s a bubble occurred which lasted a couple years and then it corrected and stagnated for two decades it seems. Then it finally got in a bull market, which lasted 10 years, and then corrected itself. The similarities are that the price shoots up and goes parabolic, then corrects and stagnates for a longer period. Just look at the appearance of the chart.

Thank you for the elaboration again my friend

I agree that $1M per Bitcoin needs much time to achieve, maybe 2 decades or more. But don't you think that $10K is low somehow ?

Could you please extened that chart till 2030 as well if you don't mind.

Regarding Gold and Bitcoin, you are triyng to find a price cycle patterns between both, am I right ?

[Anastasios]

Thank you for the elaboration again my friend

I agree that $1M per Bitcoin needs much time to achieve, maybe 2 decades or more. But don't you think that $10K is low somehow ?

Could you please extened that chart till 2030 as well if you don't mind.

Regarding Gold and Bitcoin, you are triyng to find a price cycle patterns between both, am I right ?

I see as $10k as a sure bet, although this may take a very long time. The first growth phase of bitcoin was in 2011, and stagnation lasted close to two years. The second growth phase was 2013, and the stagnation period now nearing three years. So if we see a growth period now, obviously the magnitude will be lower - no 20x increases in price. More like single digit factor increases. Then how long will it be stagnant for? 4 years? That takes us to after 2020, or the next halving.  In this time, you may be able to sell your coins and invest in a business, which may give you a greater return. So this makes bitcoin behave more and more like other commodities. Which means less price swings and more modest gains and losses, but overall growth from longer time perspectives.

Regarding gold, yes I am trying to find price cycle patterns in that too. The patterns are obvious on a chart for both though.

[Anastasios]

Updated first post. Bull market #9 was clocked pretty damn well. As was #8.

The even better news are that despite that these bull markets did not lead to a new ATH, they coaligned the other correlative factors. So the increase ratio between high magnitude bull markets vs price increase factor is now coaligned such that the end result is slightly above $2000 for both. We will see with time if this turns out to be true, I am betting on it though.

In the previous halving we had very similar behavior prior to the halving. Two low magnitude bull markets, one in january 2012 and one in august 2012. Both were "appreciative" as the price gains were for the most part retained. It is also very important to note that the january 2012 bull market was the turning point, marking the end of a significant bull market during mid to late 2011. This is strikingly similar to the november 2015 bubble, which marked the end of the 2014-2015 bear market (the bull markets inbetween were low magnitude, and the price did not retain the gains of them). Both the november 2015 and june 2016 bull markets have had their price appreciation retained for the most part.

So buckle up your seatbelts, we might be in for a big ride. The timing correlation is approximate; the effect of the diminished supply of new coins (which we all know, miners sell directly for fiat) on the exchanges takes time to effect the price. But we will see some action later this year.

[Anastasios]

Bull market #10 came along with excellent timing and pretty much exactly at the same starting point ($600) as expected. If this was the high then the price increase factor also came where expected at ~4.5. The only thing that "broke" is the timing of the bubble top. This bull market has lasted more than twice as long as every previous one.

The price increase ratio is also in line with previous data and the value seems to be as expected; I expected it to come to around 2.5 and it came at 2.4.

All in all, all metrics fell in line excellently. I can't believe how easy this was to predict and how accurate it turned out to be.

I do not think this will continue to bubble up. If it crashes then we will have to wait quite a long time before we see a real bull market like this again. If it does like the April 2013 bull market then it might retain much of the recent gains and then do a back to back bull market like in December 2013.

Hope my posts have helped someone make money!

[Slark]

Wow, This is the first time I see this thread. It was always buried under pile of other useless threads.
You your market and price predictions were extremely accurate and because of that I want to ask you,
will you continue your analysis of future bitcoin price, and market trends? Please edit opening post or create part two of this thread.

BTW what is your prediction for max price of BTC in 2017?