Predicting the bottom: what can 2013 and 2017 tell us?
If you're like me, you have a job and hobbies and things to do other than staring at charts. I consider myself an investor and cycle trader rather than a swing trader. The vast majority of my gains are made on only a handful of trades made over the course of a few months/years.
As I mentioned recently, I think this cycle has yet to peak and there are still significant returns to be had in the coming weeks/months:
So why am I thinking about the bear market bottom now when we likely have yet to see the bull market top? The answer is simple: if you have an idea of where the bottom will be, you'll have a better idea of where to sell the top. And it's a lot easier to sell in a scorching hot market when you have some degree of confidence that you'll be able to buy again in the future at a lower price.
Earlier this year, I made predictions on where this cycle's top would be based on the rate of diminishing returns of the last two cycles:
Now I'm using this same type of analysis to get a sense of where price will bottom out in the inevitable bear market. Here I'm looking at three measurements from the last two cycles:
(1) Cycle top to bottom
(2) Prior cycle top to next cycle bottom
(3) Prior cycle bottom to next cycle bottom
Then, using the same rate of diminishing returns we saw from 2013 to 2017, I've extrapolated the values for the current cycle. Here's what I found:
Prior cycle top to next cycle bottom: $29,499
Prior cycle bottom to next cycle bottom: $19,192.66
Since we don't yet know where this cycle's top is, we don't have the data required for the "cycle top to bottom" projection, but we can look at the numbers for a few realistic scenarios for where the top might be:
(1) 115k (most likely scenario): $21,689
(2) 69k (bearish scenario): $13,013.40
(3) 180k (bullish scenario): $33,948
I think the 115k top is the most likely scenario, so I'm choosing to use that figure for now. It's probably also worth noting that bitcoin has never bottomed below a prior cycle's high. And while I think that's probably a safe assumption to make again for this cycle, I don't think that pattern is likely to hold much longer.
Finally, taking the average of the three values (29499, 19192.66, and 21689), we get $23,460.22 (there's that CME gap for all you superstitious fanatics).
There are, of course, a lot of variables at play, so I'm certainly not going to start placing orders at 23.46k as if it were a foregone conclusion. But this does give us a realistic idea of what we should probably expect, and can shape our decisions going forward.
So, with this in mind, my next BTC target ($79-80k) is likely where I'll ramp up the profit-taking process, reallocating and reducing positions. Sure prices may continue running higher, but it's a long way down to the bottom, so I'm more than happy to start securing some profits here because I can be fairly confident that at some point over the next year or so I'll be buying much much cheaper.
As I mentioned recently, I think this cycle has yet to peak and there are still significant returns to be had in the coming weeks/months:
So why am I thinking about the bear market bottom now when we likely have yet to see the bull market top? The answer is simple: if you have an idea of where the bottom will be, you'll have a better idea of where to sell the top. And it's a lot easier to sell in a scorching hot market when you have some degree of confidence that you'll be able to buy again in the future at a lower price.
Earlier this year, I made predictions on where this cycle's top would be based on the rate of diminishing returns of the last two cycles:
Now I'm using this same type of analysis to get a sense of where price will bottom out in the inevitable bear market. Here I'm looking at three measurements from the last two cycles:
(1) Cycle top to bottom
(2) Prior cycle top to next cycle bottom
(3) Prior cycle bottom to next cycle bottom
Then, using the same rate of diminishing returns we saw from 2013 to 2017, I've extrapolated the values for the current cycle. Here's what I found:
Prior cycle top to next cycle bottom: $29,499
Prior cycle bottom to next cycle bottom: $19,192.66
Since we don't yet know where this cycle's top is, we don't have the data required for the "cycle top to bottom" projection, but we can look at the numbers for a few realistic scenarios for where the top might be:
(1) 115k (most likely scenario): $21,689
(2) 69k (bearish scenario): $13,013.40
(3) 180k (bullish scenario): $33,948
I think the 115k top is the most likely scenario, so I'm choosing to use that figure for now. It's probably also worth noting that bitcoin has never bottomed below a prior cycle's high. And while I think that's probably a safe assumption to make again for this cycle, I don't think that pattern is likely to hold much longer.
Finally, taking the average of the three values (29499, 19192.66, and 21689), we get $23,460.22 (there's that CME gap for all you superstitious fanatics).
There are, of course, a lot of variables at play, so I'm certainly not going to start placing orders at 23.46k as if it were a foregone conclusion. But this does give us a realistic idea of what we should probably expect, and can shape our decisions going forward.
So, with this in mind, my next BTC target ($79-80k) is likely where I'll ramp up the profit-taking process, reallocating and reducing positions. Sure prices may continue running higher, but it's a long way down to the bottom, so I'm more than happy to start securing some profits here because I can be fairly confident that at some point over the next year or so I'll be buying much much cheaper.
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