Chart of the Week: Bitcoin $300k?
As a technical analyst, one tries to predict future market moves based purely on past patterns and movement. Although this is not an exact science, you will be surprised as to how often The Market repeats itself. With The Market I mean the collective actions of every single entity participating in buying, selling, investing, hedging, speculating in financial instruments.
Today I will be looking at Bitcoin and comparing the current bull run to past parabolic bull runs in 2013 and 2017 and we will look at all the similarities.
The chart I provide is on a logarithmic scale. This means the moves are measured in percentages and not in dollar terms. Parabolic moves can often look completely crazy when viewed on a regular scale, but putting it on a logarithmic scale creates some perspective. And a possible move to $300k suddenly doesn't seem so crazy.
(For larger image click here: https://www.tradingview.com//znqP63D8x/)
I have numbered the relevant areas so you can follow along.
During 2011-2012 the Bitcoin market consolidated in roughly an 80% range (1) before breaking out of the all-time highs and rallying around 1500% (2)
This was followed by a sharp drop of just over 80% (3) before the market had a 2nd big rally (4)
Then the market started another consolidation (5) in another 80% range lasting just over 3 years before breaking the all-time highs again in 2017 before another massive parabolic 1500% rally (6)
This followed another consolidation, yet again in a roughly 80% range (7) and lasting also just over 3 years before breaking all-time highs again and starting the current bull run, already reaching nearly $60k.
(The red arrows indicate where I believe we are currently compared to the rally in 2017.)
Is this move so crazy?
If the past is anything to go by, my bet is that the move hasn't even started yet. If we find a similar parabolic rally as in 2013 and 2017, a 1500% gain would take Bitcoin to around $300K! Now, this is by no means a guarantee and I share this purely as an interesting point of view.
What would that mean for the market cap of Bitcoin?
Taking into account the total number of Bitcoins in circulation (minus those that are lost) this would put the market cap of Bitcoin at around $4.8 Trillion Dollars. Which is less than what the Federal Reserve of the United States would have printed during 2020-2021. So would that be so crazy?
Should I be buying Bitcoin?
Let me just start by saying that this is purely my own personal view and by no means financial advice. Also note that even though past market behavior is a good indication of what could occur in the future, it is not always the case. Bitcoin is definitely a risky asset and I wouldn't take out a mortgage on my house or using all my life savings to buy Bitcoin, and any decision you make in buying Bitcoin would be your own responsibility.
However, personally, for me as a trader, I do believe that the greatest risk in life is not taking any risk, so I will be looking to add to my holdings during March 2021 with any spare change I can afford to risk :)