Analyse until you drop!
Predictions & Models 2.0:
Conclusions from this chart:
Trend-chasing bias strongly influences BTC price predictions and the development of price models. Trend-chasing bias makes investors chase past performance in the mistaken belief that history predicts future performance. It is why most people start investing near Bitcoin ATHs.
There is a pattern in how most Bitcoin predictions are wrong. But can this pattern can be used to create one good forecast from many wrong ones? Richard Thaler established that "people depart from rationality in consistent ways, so their behavior can still be anticipated and modeled".
How to Make Wrong Bitcoin Predictions:
Rule 1: If price went up like crazy the last 9 month, project the same increase 12 months into the future.
Rule 2: If Rule 1 did not work out, move the predicted number one year into the future. Repeat Rule 2 until Rule 1 is valid again.
How to Make Correct Bitcoin Predictions:
Rule 1: If price went up like crazy in the last 4-5 months, project the same increase 4-5 months into the future.
Rule 2: Copy the 3-4 year prediction of a power law model. Maybe adjust it a bit downwards to be safe.
Rule 3: After a bear market project a similar growth as at the start of a previous cycle 6-12 months into the future.
There are 3 types of BTC price models:
Moon models assume that Bitcoin grows at the same pace.
Power models state that Bitcoin keeps growing with the same decreasing speed.
Classic models imply that Bitcoin's growth decreases even faster than in the past.
Power (law) models project declining past BTC growth most accurately into the future. @gsantostasi's LM did it in early 2014, but failed due to limited data. Trolololo from Oct 2014 might be too optimistic too, because it was so early. Newer models have a lower trajectory.
There is a lot of overlap between power & classic models presently. If power models correct again in future, they come close to classic models. Classic models are still quite bullish, even with more conservative predictions. They make BTC again the best investment of the decade.
Moon models freeze the declining BTC growth rate at one point in time and assume constant growth in future. This contradicts price history. The TT model froze growth in 2015, S2F does it with the next halving. TT has almost failed. The next 2-6 years will show if S2F survives.
More on Bitcoin's diminishing growth in this article by Chris Burger.
The Power Law Corridor model by Chris Burger has a nice property: The inclination angle for all 3 bull markets is 45° on the log log chart. Multiplying the base angle with the golden ratio equals 45° too. A 45° angle from Dec 2018 to the upper line leads to an ATH of $200k at the end of 2022.
The above projection assumes that the Bitcoin cycle length is increasing. The main driver of the expanding cycle would be the weaker and weaker effect that the halving has on price appreciation. In 20-30 years Bitcoin may have a similar cycle length as gold and would be just as stable in price.
The time from halving to retaking the old ATH:
1. Halving: 3 months
2. Halving: 7.5 month
3. Halving: 19 month ???
4. Halving: 48 month ???
May 2020 plus 19 month would be December 2021. Once BTC is at the old all time high (ATH) it usually only takes 8-10 months until it reaches a new ATH. Three times the final bull run only needed 8-10 months. So a new ATH would be around October 2022.
The new ATH would lie between 5x to 10x from the old ATH of 20k. So 100k to 200k. The Power Law model of @hcburger1 forsees a maximum of ca. 200k at the end 2022. But 100k or 150k is possible too.
So the next 2 years would have a more or less slowly ascending BTC price. Nothing compared to the explosive increase and fast decline of 2019.
A Power Law Corridor for Ethereum
Assumes that ETH will have a similar diminishing growth like BTC. Possible next ATH for Ethereum at 8k or above. If BTC goes to 100k, ETH at 8k would have 50% of BTC's marketcap just as in Jan 2018.
30x for ETH, 10x for BTC from here.
BEAM stands for Bitcoin Economics Adaptive Multiple and may look like a typical indicator, but is can also be used as a basis for an anti-cyclical investment plan for Bitcoin as well as other crypto assets whose cycle is tied to that of Bitcoin. Read more
The first atypical Bitcoin cycle in 2009-2011 was purely demand driven as the supply increased a great deal during the first three years of its existence. The second and third cycle had a similar 3 to 4-year-structure, but played out a bit differently. The second cycle (2011-2014) had a few big moves whereas the third cycle (2015-2018) was a continuous climb that accelerated. The current fourth cycle, which started in December 2018, rather resembles the second cycle with a wild run in the first half of 2019 and big calm down in the second half. It cannot be excluded that the current cycle will take longer than 4 years. Read more
A projection of future Bitcoin prices (gray chart line) based on Chris Burger's Power Law Corridor model assuming 4 year cycles. As you can see, Bitcoin's price (blue chart line) is extremely volatile, which drag on investor's nerves, but so far there has always been a lower low similar to stock indices. There is no guarantee that this scenario will happen. Past performance is not indicative of future results.
A comparison of Chris Burger's Power Law Corridor model (gray, red and green lines) with PlanB's Stock to Flow model (magenta line). The chart shows that both models are very similar. Power Law models are more elegant, because they requires less variables (time vs. time, stock & flow) and offers more realistic future predictions. Stock to Flow is a more complex version of a power law model and requires economic assumptions, which the power law models do not require.