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Flash Alert: Wednesday 12th February
What happened after our update on the 3rd of February?
In our update last week, we had stated that “we cannot discount the possibility of seeing some selling pressures creep back into the market” following a strong rally and had stated that “any short-term selling pressures are likely to act as a springboard to propel Bitcoin towards higher highs“.
Bitcoin did, as a matter of fact, dip from the $9,304-$9,618 on 3rd February to reach an intra-day low of $9,093 a day later before resuming a powerful rally that saw BTCUSDT rise to an intra-day high of $10,450, as at the time of writing today.
From the time we wrote our update (on 3rd February) to date, the price of Bitcoin is up by a further $1,146 or 12.3%.
So where do we stand from here?
As we have repeatedly stated, Bitcoin is entering the most bullish phase of a bull market megacycle and we believe that Bitcoin is very likely to retest its previous high of $14K before the May halving (‘halvening’)
But we also expect volatility to keep rising, especially between $10K and $12K region, so trade carefully because there will be bumps along the way. Temporary selling pressure is nearly always necessary, as it helps to garner momentum for the price to reach higher highs.
So far we are very pleased with our research and analysis on Bitcoin, having mathematically proven where a potential bottom for Bitcoin could reside (as far back as 4 months ago). We even provided an accurate guesstimate of when buying sentiment is likely to pick up – as may be seen from the screenshot below.
The observations made four months ago may appear intuitive now although the bias at the time was extremely bearish since Bitcoin was entering death cross territory!
At the time we relied on a mathematical mean-reverting model that we had developed to observe where Bitcoin could find a potential bottom. Of course, models must be refined over time although $5K-$6K is not so bad considering BTCUSDT had bottomed at $6,435, which is only a 7.25% deviation from the upper $6K level our model had identified.
Going forward we will be conducting further analysis to understand where BTCUSDT could find its next all-time high.
We will be:
1. Updating our log price analysis and reversion models.
In our log price analysis, we had pointed out that if the historical log price patterns continue to hold, it would be possible for the price of Bitcoin to rise to a new channel that would see the price gyrate between $22,000 and $162,754.
Interestingly, Peter Brandt and his team unveiled research earlier this month suggesting Bitcoin is taking ‘aim at $100,000 target‘, as may be seen from Peter Brandt’s Twitter post below.
We enjoy seeing other reputable analysts share our opinion although we are highly self-critical and aim to update our models in due term to see whether the $100K stock-to-flow Bitcoin price prediction carries any merit.
2. We will be updating our hash rate models and analyzing various deviations between actual price versus derived fair value price (and even making cross-comparisons with our log price models).
We observe that a price of $22,000 for Bitcoin isn’t too far fetched at all actually. According to our model, the hash rate would have to be around 135,000,000 – see here – to justify a price of $22,000. You may even run your own simulation using the hash rate calculator at the bottom of the page.
In the meantime, Fundstrat earlier this month observed that Bitcoin could rise to $27,000 by summer noting that “whenever Bitcoin breaks back into its 200-day, its average six-month gain is 197%“.
3. We observe that during the previous Bitcoin rally, the MACD on the weekly charts had shown a bullish crossover around 21 weeks before peak price. Over that period the price of BTCUSDT had rallied circa 314% from a low of $3,373 to a high of $13,970. During the current period, we saw the bullish weekly-MACD crossover occurring at a price of $8,238. Applying the same principle on a like-for-like basis we could derive a potential peak price of $34,105. If we had to be conservative and debase that figure (to 214% ) then that would equate to a peak Bitcoin price of $25,867.
Based on the above observations, perhaps a peak price of $27,243 ( the average of $22,000 + $25,867 + $27,000 + $34,105) isn’t too far fetched – but who the heck knows… We promise to delve much deeper and revisit our earlier analysis for further confirmation.
As per our previous updates, we reiterate to our audience that we do not have a crystal ball. We attempt to apply a combination of mathematics, fundamental and technical analysis to our updates to provide you with fresh and unique insights although at the end of the day there are no guarantees.
Our derived price scenarios for Bitcoin may not pan out and therefore we warn our growing audience to tread very carefully and at their own risk. Bitcoin is very risky (as you must all know by now) and past performance is not always indicative of the future.
The next Bitcoin update will be published on Monday 17th February 2020
Anyone interested in reading our previous updates may do so here as they remain valid and provide a good trail for anyone wanting to catch up.
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