Bitcoin Levels Matter (ATH BLM)I have been patient to not issue new bearish projections until I see what I know to be objective price action evidence. With Sunday's Weekly bar close we received such a signal. In this post I want to detail how important this signal is in the understanding of price action as well as in actionable trading. I will present what I think is likely in the near term for Bitcoin price. Finally at the end I will present my long term bullish Bullish thesis.
While chatting with a Bitcoin Maximalist friend I mentioned I was waiting for this event to confirm or reject the current price battle of the former All Time High. I also wagered a one way bet that IF this happens I will don a priest outfit and proclaim that Bitcoin is finally bullish for this cycle. My friend asked:
I've never gotten a decent explanation for why technical analysis people care about the closing price for a market that never closes. What's so special about the price on Sunday at midnight or whatever?
It is important for two reasons:
A week is a week across the globe. Stock markets close their 5 days. Crypto all settles on GMT. It is therefor a mostly standardized unit of time. It lets one aggregate and consider the price data for that period of time as objectively as possible.
It makes one patient. By waiting for the bar to close... one can separate from emotional decisions and avoid false breakouts.
What one would want to see on a solid breakout is a Weekly bar to close well beyond the past All Time High. Such an event was evident in the 2020 Bitcoin bull run:
There was no question as to if this breakout was successful and from this point price rallied much farther. Indeed one had to be patient through an 18% week but price continued higher for a rally of 175% before topping out and creating a new ATH.
The opposite of this concept was on display in late 2021 when the last cycle's bull run failed not once but twice:
Those that do not look to price action for making decisions may present other reasons as to why the 2021 run did not continue. I have been told that Sam Bankman-Fried was "selling fake Bitcoins" and that other market actors like Celsius were to blame. I reject these narratives. The price is the price. There is no more we can prove or attribute causation than what we see on the chart. The fundamental premise, embodied in price closing higher or lower from where it was before, is simply:
If it was truly bullish... people would have kept buying.
Looking for a weekly bar to close or reject is the most objective way we have to analyze that choice of market participants.
Also for traders the level is very important in the short term. There have been MANY actionable respects of these prior levels from nearly 3 years ago that can be seen when one goes down to the lower timeframes. Knowing where these levels are is very important to short term traders when looking for entries and exits.
So what may happen now? We can look back to the 2017 ATH break for the most analogous example. Following the first week closing above, and the second week closing below, price retraced -33.5% from its new ATH.
If we projected a similar movement to the current price action of Bitcoin it would place price at around the last consolidation zone at 51.8k
Now finally yes I do have a long term bullish Bitcoin prediction.
Over the course of this bull run I've had the opportunity to talk with many Bitcoin Maximalists who espouse the theory that Bitcoin will replace the imminently failing US Dollar and become a global reserve currency. I do not believe this eventuality is likely. In fact, I do not think it will happen within the next decade certainly if not ever. Bitcoin does not scale as a technology to suit this requirement of the world. It is also far too complicated for true mass adoption when compared to the ease of use of CBDCs. Above all though Bitcoin fails as money because no one will spend a money which they believe will have infinite value in the future.
While Bitcoin has some fantastic properties I cannot logically come to the conclusion that it will transcend human nature.
What I do think is that Bitcoin has limited supply and is a store of value. I think that as long as people believe it has value, buy it, do not sell it, and encourage others to do so through memes... the Number Go Up (NGU). NGU I believe is Bitcoin's primary use case and it does not require Bitcoin to be anything more than it is.
What has become interesting to chart is the logarithmic price of Bitcoin over its history. I do not use logarithmic for trading but I do believe it is useful in demonstrating the long term exponential properties of Bitcoin in both price AND supply.
While the returns of Bitcoin, expressed by All Time Highs and then cycle lows, are increasing... by the rate of increase is decreasing . The drawdowns, by the way, are remaining large at -75-95% but there is not much room for variability there. It is interesting that as we observe more of Bitcoin's price history the price itself is following an exponential model at a curve incredibly similar to the supply itself. The chart above is my rough attempt using angles to draw a curve but it paints a reasonable picture for predicting what this future curve may look like.
Where I would expect this cycle's new ATH to be is around 145k by end of year if it happened within said time. The curve then further suggests a price of 300k by 2030. The vaulted "1 million dollar Bitcoin" much memed is something perhaps our children will see in 2100.
If we consider these numbers;
125% Return in 1 year
367% Return in 6 years (29.4% APR)
1462% Return in 76 years (3.7% APR)
These returns are fantastic compared to other investments. However, they are admittedly less meme worthy and unlikely to be very widely circulated on social media which tilts to extremes for greater exposure.
When I talk to another Bitcoin Maximalist friend who believes in "The Bitcoin Standard" he explains to me that the volatility problem of Bitcoin will be solved by mass adoption. I do not believe that this true as introducing more humans with more emotions creates more volatility... but we do seem to arrive at the same answer of reducing volatility over a long timeline.
Another thing this curve model suggests about the cycle lows is that even in 2030 the cycle low will be around 65k... where we are right now. Some Bitcoiners like to repeat meme such as "the best time to buy is yesterday, the next best time to buy is NOW" which serve to encourage lack of patience in favor of their bags going up via new buyers. My personal meme is "Bitcoin will be more expensive and Bitcoin will be cheaper than it is today."
Both my meme and waiting for price action to confirm keeps me patient.
