Bitcoin | At a historic crossroads!
Updated
Hello dear TradingView Crypto Savvy,
If you want the best-modeled full history view of Bitcoin price action with insights for the next few years, you have opened the right idea. Today's update is a more sober follow up to last year's tongue-in-cheek long term view of Bitcoin price action modeled against Stock to Flow. If you are not aware of Stock to Flow and how it is the best predictor available for Bitcoin price performance, please see my related idea.
Today's idea adopts a bollinger band style view of stock to flow, where I have carefully tweaked the model to precisely fit the last decade of price action. You have never seen a better view of Bitcoin's long term price! We are looking back at the $2 days and forward to the next halving. The most recent Bitcoin mining block reward halving occurred May 11, 2020 and prompted the most recent bull run, as other halvings have done in the past. There is a growing delay from the halving date to the all-time-high date for a cycle, which I have highlighted on the chart.
This delay points to the possibility of the high for this cycle being in the future. I project sometime later this year or early next year.
"Wow, that's great!" I hear you say... but wait.
I mentioned a historic crossroads in the title, so that must mean there's a catch, right? Right. Well look at the orange line I have drawn. That represents the long term support line for a "truly" logarithmic growth, as we are looking at a logarithmic chart. Notice how we were riding close to that support just before the Third Halving in 2020, and the Pandemic Panic actually brought us far south of it for a brief snapshot in time.
The halving snapped us out of bearish doldrums and we wound up with a perfect storm for the last two years of bullish on-ramps to broad institutional adoption. We started 2021 with Bitcoin dominance (
BTC.D) at it's highest point in years and the crypto market as a whole smashing through 
$1 Trillion USD market capitalization. Then in 2021 something remarkable happened.
2021 saw DeFi frenzy and the rapid capitalization of newer Layer 1 Cryptos. Bitcoin dominance plummeted to near all time lows and has stayed there til today. Yet Bitcoin still reached a new high as the total crypto market had a historic rally to $3 Trillion in November 2021. Then the correction came.
The crypto total cap now four months later sits 40% below the peak of November 2021. The last six weeks of sideways price action have suggested to some that the bottom has been found, but has it?
To inform an answer to that question, let us take the best tool we have for modeling Bitcoin's long term price, Stock to Flow, and use it as a guide. We will use it as a backbone and make some adjustments based on the insights that we are finding are shaking up the future of the crypto market.
What are those key insights?
All of these factors point in the same direction: slowed growth for Bitcoin. Now let's reference the big red line on my chart. Based on these insights, this is the growth curve that I am fairly confident will hold until the next halving in 2024. What does that tell us about our choices today?
Well that is our catch. For the next few months, our current price is above the long term support curve I have drawn based on those insights. This curve has been tested, and in the worst circumstances briefly broken, every halving cycle so far. There is not yet confirmation of a trend reversal, and we are seeing suspiciously little volume the last couple of months. My estimate of a future date for a peak this cycle is very loose and it could well be ahead in 2023, so that gives about a year for a low to be found before we try for the true high of this cycle.
Current geopolitical volatility opens the opportunity for further "black swan" events briefly pushing us below our new red support trend line. This suggests the possibility of a low between 32K, in normal circumstances, and 22K in the worst circumstances before we find the high for this halving cycle.
Now let's look back at our orange line. The correction has brought us below it for the second time ever, and our insights point to it never being respected again. Yet there is still hope for a higher peak this cycle, and we have a new more-informed and better-fitting curve that's ready to be tested for a fit to the next two halvings. This confluence of factors is why we are at such a historic crossroads!
Just because the orange line isn't being respected as a support, doesn't mean it is no longer in play. I suspect we may see it touched one or two more times as a resistance (and maybe once briefly as a support) before we fall further away from it. This leaves a small window open for my previous prediction of a peak this cycle above 200K.
What other insights can we gain from this fully zoomed out view and our new collection of insights? Well they suggest that another Layer 1 crypto may be neck and neck in capitalization with BTC within a couple of years. ETH is the obvious candidate, and has been gaining ground slowly and consistently since 2019. It also has major upgrades planned for maturity this year which could completely change the game on its costs and scalability, potentially unleashing a new trend of accelerated growth versus BTC. A win for ETH is not a guarantee though.
Other Layer 1 networks have gained ground at a record pace beginning in 2021. Terra has rapidly emerged as the front runner, largely driven by the intrinsic appeal of having built the first demonstrably well pegged DeFi stablecoin with
TerraUSD, with the cherry on top being the stable 20% APY offered by BINANCE:ANCUSD staking. Competition will be stiff though, with many other contenders looking for an edge. DeFi robustness, low costs, security, usability, scalability, etc. all have to align in just the right way for a winner to emerge. I suspect we will see a clear front-runner in the next couple of years though.
How does this full picture inform our crypto strategy today? Personally, I'm significantly reducing my focus on BTC holdings, adding more ETH holding, and dedicating significant time and energy to get a big picture view of the competitive landscape for DeFi-ready Layer 1 Cryptos. What is your focus and do you have a favorite Layer 1? Let me know in the comments who you think the winners will be and why!
If you appreciate my analysis and would like to see more in the future, please like and follow!
With that all said, this is not investment advice. I am offering my ideas for educational purposes only. Enjoy and take care.
If you want the best-modeled full history view of Bitcoin price action with insights for the next few years, you have opened the right idea. Today's update is a more sober follow up to last year's tongue-in-cheek long term view of Bitcoin price action modeled against Stock to Flow. If you are not aware of Stock to Flow and how it is the best predictor available for Bitcoin price performance, please see my related idea.
Today's idea adopts a bollinger band style view of stock to flow, where I have carefully tweaked the model to precisely fit the last decade of price action. You have never seen a better view of Bitcoin's long term price! We are looking back at the $2 days and forward to the next halving. The most recent Bitcoin mining block reward halving occurred May 11, 2020 and prompted the most recent bull run, as other halvings have done in the past. There is a growing delay from the halving date to the all-time-high date for a cycle, which I have highlighted on the chart.
This delay points to the possibility of the high for this cycle being in the future. I project sometime later this year or early next year.
"Wow, that's great!" I hear you say... but wait.
I mentioned a historic crossroads in the title, so that must mean there's a catch, right? Right. Well look at the orange line I have drawn. That represents the long term support line for a "truly" logarithmic growth, as we are looking at a logarithmic chart. Notice how we were riding close to that support just before the Third Halving in 2020, and the Pandemic Panic actually brought us far south of it for a brief snapshot in time.
The halving snapped us out of bearish doldrums and we wound up with a perfect storm for the last two years of bullish on-ramps to broad institutional adoption. We started 2021 with Bitcoin dominance (
BTC.D) at it's highest point in years and the crypto market as a whole smashing through $1 Trillion USD market capitalization. Then in 2021 something remarkable happened.2021 saw DeFi frenzy and the rapid capitalization of newer Layer 1 Cryptos. Bitcoin dominance plummeted to near all time lows and has stayed there til today. Yet Bitcoin still reached a new high as the total crypto market had a historic rally to $3 Trillion in November 2021. Then the correction came.
The crypto total cap now four months later sits 40% below the peak of November 2021. The last six weeks of sideways price action have suggested to some that the bottom has been found, but has it?
To inform an answer to that question, let us take the best tool we have for modeling Bitcoin's long term price, Stock to Flow, and use it as a guide. We will use it as a backbone and make some adjustments based on the insights that we are finding are shaking up the future of the crypto market.
What are those key insights?
- DeFi and newer Layer 1 Cryptos are pushing Bitcoin dominance towards new all time lows
- Bitcoin has become a household name around the world. It is solidly an institutionalized asset now. It represents a non-negligible percentage of global GDP.
- Before the last halving, Bitcoin was already losing steam against its long term logarithmic growth support
All of these factors point in the same direction: slowed growth for Bitcoin. Now let's reference the big red line on my chart. Based on these insights, this is the growth curve that I am fairly confident will hold until the next halving in 2024. What does that tell us about our choices today?
Well that is our catch. For the next few months, our current price is above the long term support curve I have drawn based on those insights. This curve has been tested, and in the worst circumstances briefly broken, every halving cycle so far. There is not yet confirmation of a trend reversal, and we are seeing suspiciously little volume the last couple of months. My estimate of a future date for a peak this cycle is very loose and it could well be ahead in 2023, so that gives about a year for a low to be found before we try for the true high of this cycle.
Current geopolitical volatility opens the opportunity for further "black swan" events briefly pushing us below our new red support trend line. This suggests the possibility of a low between 32K, in normal circumstances, and 22K in the worst circumstances before we find the high for this halving cycle.
Now let's look back at our orange line. The correction has brought us below it for the second time ever, and our insights point to it never being respected again. Yet there is still hope for a higher peak this cycle, and we have a new more-informed and better-fitting curve that's ready to be tested for a fit to the next two halvings. This confluence of factors is why we are at such a historic crossroads!
Just because the orange line isn't being respected as a support, doesn't mean it is no longer in play. I suspect we may see it touched one or two more times as a resistance (and maybe once briefly as a support) before we fall further away from it. This leaves a small window open for my previous prediction of a peak this cycle above 200K.
What other insights can we gain from this fully zoomed out view and our new collection of insights? Well they suggest that another Layer 1 crypto may be neck and neck in capitalization with BTC within a couple of years. ETH is the obvious candidate, and has been gaining ground slowly and consistently since 2019. It also has major upgrades planned for maturity this year which could completely change the game on its costs and scalability, potentially unleashing a new trend of accelerated growth versus BTC. A win for ETH is not a guarantee though.
Other Layer 1 networks have gained ground at a record pace beginning in 2021. Terra has rapidly emerged as the front runner, largely driven by the intrinsic appeal of having built the first demonstrably well pegged DeFi stablecoin with
TerraUSD, with the cherry on top being the stable 20% APY offered by BINANCE:ANCUSD staking. Competition will be stiff though, with many other contenders looking for an edge. DeFi robustness, low costs, security, usability, scalability, etc. all have to align in just the right way for a winner to emerge. I suspect we will see a clear front-runner in the next couple of years though.How does this full picture inform our crypto strategy today? Personally, I'm significantly reducing my focus on BTC holdings, adding more ETH holding, and dedicating significant time and energy to get a big picture view of the competitive landscape for DeFi-ready Layer 1 Cryptos. What is your focus and do you have a favorite Layer 1? Let me know in the comments who you think the winners will be and why!
If you appreciate my analysis and would like to see more in the future, please like and follow!
With that all said, this is not investment advice. I am offering my ideas for educational purposes only. Enjoy and take care.
Note
Today we are seeing Bitcoin push up the key correction resistance, and I have posted an update with a more zoomed in tactical view to inform the next few months of possibilities:
Note
This year's reactionary measures to a historic global inflation shock, coupled with wartime uncertainty and increasing regulatory concern around crypto have fomented the perfect storm for another attack on the long term support I have carved out.Today we briefly wicked under this support, and at this moment we rest squarely on it at $28,200. The current macro environment suggests caution that the support may be further tested.
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