Crypto News: August 24, 2018
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Bitcoin price predictions are hard.
A proper prediction requires accurate identification of the future price of Bitcoin, while also stating the timeframe which that price will be reached. If you make a prediction without price or timeline, you are merely guessing.
In January 2018, I predicted that Bitcoin could reach $50,000 by the end of this year — I was wrong. As I’ve looked at more data, it is apparent that I was correct to predict a Bitcoin price of $50,000. Unfortunately, my timeline may have been off by as much as 4 years.
What data is driving me to revise my outlook for Bitcoin?
Parabolic increases in price continue to take longer — each parabolic run is measured from the last all-time high to the new all-time high. The first rapid price appreciation took just over 300 days (2010-2011) and the second took over 900 days (2011-2013). The last parabolic price increase peaked at ~$20,000 (2013-2017) and took almost 1,500 days to complete.
If this trend continues, we are unlikely to reach the next all-time high until July or August 2023. This would be more than 2,000 days since the current all-time high, which was reached in December 2017.
Bear markets continue to last longer — each bear market is measured from peak to trough during a prolonged drawdown period. The first bear market lasted ~160 days (2011) and the second bear market lasted ~400 days (2013-2014). The current bear market, if it follows the historical trend, is likely to continue for 650 days.
If this comes to fruition, the crypto markets won’t begin recovering from the recent negative price movements until Q3 of 2019. This is a much longer market cycle than most people are currently expecting, which leads me to believe that people will experience a level of pain and discomfort that we haven’t seen in quite awhile.
Each Bitcoin halving has led to a bull market — scarcity is a powerful feature. As the Bitcoin mining reward gets cut by 50%, the price ultimately increases to account for the deflationary schedule. We saw this in both 2012 and 2016. There is no guarantee the next halving (May or June 2020) will drive a bull market, but history often rhymes.
It is never fun to admit that you were wrong about something you said publicly. However, it is important to constantly test your own assumptions and beliefs. As I’ve tested myself over the last few weeks, it became obvious that I needed to gather better data and rebuild the prediction model.
The final data outputs left me with a few uncomfortable conclusions. The most notable one is that we are likely to see Bitcoin near $3,000 before we see Bitcoin at $10,000 again. If this is true, that means we still have ~50% price decrease to go. Things may get really, really ugly if this happens.
Obviously I can’t promise the model I’m using is accurate, nor can I promise that my conclusions will stand the test of time. In fact, I was wrong just 9 months ago so everything I say about price targets should be taken with a grain of salt. Nothing I do professionally requires me to read charts, understand price movements, or predict future potential — this is probably a good thing.
Do your own research. Buckle up for the bumpy ride. And lets see if $50,000 by December 2022 or January 2023 is a more accurate outlook.
UPDATED: Obviously, some people agree with this post, while others disagree. I want to call out a few people that helped me think through this revision or have put together models that are worth checking out.
The first is @KunalDaSen who has an epic visual. We vary on 2023 peak (He is at $160k and I’m at $190k, I have $50k before Jan 2023 and he has it during Jan 2023, and then we’re off by a few days on lengths of bull/bear markets). This is a must see for the amount of detail in one chart: Click here
The second is @Soloyopee who uses a historical Elliot Wave theory to create this chart: Click here. We vary on the bottom (He is at $4,230 and has the top at $162k in 2023).
Lastly, I had an in-person conversation last week with @CryptoEthan where he really pushed me to think more deeply about where Bitcoin was going. He told me he thought $3,000 would be the bottom and this is one of his charts: Click here
These guys are all pros at technical analysis and have far more understanding than me. I defer to their expertise on any mistakes I may have made as I worked through this.
-Pomp
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THE RUNDOWN:
Ritzy Aspen hotel sells real estate on blockchain with Indiegogo's help: The owners of the St. Regis Aspen Resort in Colorado have begun to sell real estate security tokens on a blockchain with help from Indiegogo, a crowdfunding site. The St. Regis Aspen Resort represents one of the first major real estate properties in the U.S. to test out tokenization, a hot topic among cryptocurrency enthusiasts, investors, and crafty financial engineers. Read more.
Benchmark partner Sarah Tavel on fundraising and her latest crypto investment: Sarah Tavel led Chainalysis’ $16 million Series A round. The company works with law enforcement agencies on digital currency crimes. She said she’s very excited about what was happening in the crypto ecosystem. “There’s this fiat world, which is regulated, and this crypto world, which is largely unregulated, and you need a tool to bridge those two parties so that the regulated world can participate in the crypto ecosystem,” Tavel said. Read more.
SEC to review decision rejecting bitcoin ETFs: The SEC said on Thursday it will review a decision by its staff to block nine bitcoin-based exchange-traded funds from coming to market. Staff at the SEC on Wednesday rejected applications for new funds from three companies, suggesting they were not yet convinced that the products would not be subject to fraud or manipulation. But the SEC’s four commissioners will review those decisions, according to letters the SEC posted on its website. Read more.
Bitcoin price defends key support despite ETF rejections: Bitcoin is teasing a minor rally, having defended key support at $6,230 despite a string of bad news. The cryptocurrency is changing hands at $6,400 on Bitfinex – down 3% on a 24-hour basis. Meanwhile, 94 out of the top 100 cryptocurrencies by market capitalization are flashing red, according to CoinMarketCap. The risk-off tone in the cryptocurrency markets is likely associated with the SEC’s rejection of several proposals for bitcoin ETFs on Wednesday. Read more.
Crypto startups are destroying millions of coins – and investors love it: Crypto entrepreneurs are actively destroying their own money supply – and generating value for investors in the process. It's turning out to be an unexpected benefit of the initial coin offering model, whereby startups and projects fuel and fund their projects with a scarce digital asset they create. In short, these projects can use the token to price their services, and then strategically alter the economics of the money supply to which they have a direct relationship. Read more.
Electronics giant LG focuses on development of blockchain, AI, IoT with branding strategy: LG CNS, a subsidiary of South Korean multinational conglomerate LG Corporation, has announced a plan to strengthen its enterprise offerings in seven key areas including blockchain. LG CNS is planning to release new “strategic” brands for each of the seven platforms of newly developed technologies — blockchain, artificial intelligence, internet of things, smart city, smart factory, robot service, and smart energy — in order to promote the “fourth industrial revolution” with its enterprise portfolio. Read more.
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Nothing in this email is intended to serve as financial advice. Do your own research.
Pomp, it is refreshing to read an article by someone who can admit an error and frankly
doesn't have the answers that people want to hear. There are many spinners in the market place whom you defined as 'guessing'. It gives my great comfort to know you are more of a realist than a guesser. I have been in this gold/silver storm since 2011 and know what the pain feels like, the main difference is with gold/silver you have more 'tools' to trade with in hedging some of the movements. Keep up the good work. Don Cephus