Bitcoin: This is the Quiet Before The Storm

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The air feels different during the autumn, which is around the corner here in the northern hemisphere. I must admit, I really enjoy walking down the street when it’s covered in colorful leaves. Can’t really say why, but it has always been one of those guilty pleasures of mine.

Now, more than ever, due to the crypto-market seasonality, I’ve become passionate about this period.

For the bitcoin bull-season is about to begin.

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Prices don’t lie and, from experience, bitcoin doesn’t usually stay this stable for such long periods. At the time of writing, bitcoin is still below the USD $7000 levels; nonetheless, if we take into account the contrarian rule for investing, as well as the dynamics of volume and volatility when aligned to a spike in general people’s interest, we may be able to predict a significant rise in bitcoin’s price.

The absolute truth is that we haven’t seen such low volatility in bitcoin since last year, just before the most epic bull-run in history begun.

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Plus, I can’t deny my guts.

There’s definitely something peculiar in the air, no denying it.

Is it the smell of fresh cash? Could it be a false sense of hope as some predicted we haven’t reached the bottom?

Whatever happens, the next couple of weeks will make waves that will ripple throughout 2018.

Something big is coming, and I feel it’s now time to play your cards.

–This article isn’t financial advisement as it represents my personal opinion and views only. I have savings invested in cryptocurrency so take whatever I write with a grain of salt. Do not invest what you cannot afford to lose and always read as much as possible about a project before investing. Never forget: with great power, comes great responsibility. Being your own bank means you’re always responsible for your own money—

Bitcoin’s Price Action

bitcoin price
Source: CoinMarketCap

Mati Greenspan, Senior Market Analyst at eToro, just shared with us an amazing piece from the Economist released in 1988 (20 years ago), discussing the need for alternative sound-money like currencies, detached from governments and political ruling. The title was spectacular for its publishing time:  “GET READY FOR A WORLD CURRENCY.”

Sadly, it seems most 21st century economists have put that idea into the let’s-forget-about-that bucket; however, as of 2009 Satoshi Nakamoto made sure we could all benefit from a proper P2P digital permissionless world currency, limited by mathematical parameters which give it sound-money-like properties; and today here we are again, discussing when its value should sky-rocket, like that’s an absolute certainty.

The Value of Bitcoin

The value of bitcoin is entangled to its massive store of value properties, as explained by Jimmy Song, long-time bitcoin developer and maximalist: the fact there’s a limited supply available, while it’s still easy to get and store makes bitcoin the perfect digital asset to use as money. However, nowadays it’s super straightforward to exchange and spend bitcoin, giving it unit of measurement properties as well.

To me, this is a joke. Look at the value of the global financial and assets market when compared to cryptocurrencies. If bitcoin is now worth about USD$115 billion, that simply means when 10 percent of all wealth shifts from stocks and gold into bitcoin, there will be about 7-8 trillion dollars coming into the market.

If a couple of million dollars in volume have such an effect on the cryptocurrency market prices, can you imagine the impact a couple trillion will have? At some point, we gotta ask ourselves: can bitcoin really hit $100k? What about $1 million per bitcoin?

I honestly don’t see why not. Nonetheless, can the opposite also happen?

Absolutely.

There are many factors which could potentially destroy the short-term price of all cryptocurrencies, such as bans, regulatory action, and price manipulation. However, in the long-run, no single entity can have such an impact on bitcoin’s price, as the more people who purchase bitcoin, the more distributed it gets. Right now, if you hold about 0.1 bitcoin, you are part of the top 1 percent who can ever own that much. This is, assuming in the future everyone owns just a tiny bit of bitcoin, due to the 21 million supply upper limit, 0.1 bitcoin becomes the necessary amount threshold to be part of the top 1 percent people in the world with the most bitcoin.

Surprising, right?

Looking at the market through optimistic lenses, I truly believe sooner or later the price of bitcoin will explode. That’s what history tells us, plus, in the long, long-term I personally don’t think any fiat-currency will ever be able to compete with bitcoin’s sound-money logic.

When Will Bitcoin’s Price Rise Again?

World GDP Growth, 1960-2017. During this 57 year period, the world’s wealth 80x in value

I’m usually quite patient and try not spread FUD or FOMO; however, it seems the “planets” are aligning, and we might soon experience a bull run like last year’s.

That alignment can be represented by a couple of historical factors, which have been connected to huge bullish seasons; from seasonality to people’s overall interest in cryptocurrency and powerful TA indicators, there are common grounds for a huge price swing. Let’s discuss them below.

(1) Seasonality

Bitcoin’s price from 2013 to 2018. We can clearly see during most Q4s, price has mostly skyrocketed

The core argument for most people, why bitcoin’s price is about to moon, is linked to the crypto-market seasonality; this is, during the last quarter of the year there seems to be a sudden spike in cryptocurrency prices. It has happened a couple times in the past like from 2013 -> 2014, 2015 -> 2016, 2016 -> 2017 and, finally last year, from 2017 -> 2018.

If we take into account mathematics and the theory of probability, looking at the past 5 years, there’s only a 20 percent chance bitcoin’s price won’t rise; that is, since 2013 to 2018 bitcoin’s price skyrocketed 4 out 5 times.

I mean, those odds are pretty great.

Should we ignore them? Is there some other factor correlated to bitcoin’s price we cannot foresee? Some “randomness,” per se, linked to the price, we cannot comprehend?

(2) People’s Interest

Google analytics: bitcoin

One thing’s for sure: the number of people looking up bitcoin seems to be directly correlated to its price. This is, whenever bitcoin’s price goes up, people go crazy and start looking up bitcoin on google. That’s also a trait of dumb-money, to become interested in an asset after the price skyrockets. What’s the purpose of investing if you’re already sure you’re haven’t caught the bottom or at least a nice price-level that lowers your risk?

That’s the role of smart-money: whales, financial institutions, funds, and whatnot, decide when the price goes up by purchasing directly in the market. If you’re looking to lower your risk, try to buy bitcoin when people’s interest is at its lowest, as historically this is when prices are at their lowest levels too.

If you’re looking to widen your knowledge on how social media predicts bitcoin’s price, you can read this great paper published in 2015, which aims at answering just that. Another report from Business Insider published in late 2017 also came to the same conclusion, that prices and Google searches were highly correlated.

(3) Technical Analysis (TA)

To most of you, this is what matters the most, right? Good old price analysis, the purest form of technical analysis there is.

As this is not my field of expertise, I’ll be borrowing knowledge from some experts like Mati GreenspanAlessio RastaniDatadash, and SunnyDecree. There’s plenty of others you can follow on YouTube, Medium or Twitter, but these are some of my preferred analysts!

The overall sentiment is that we should expect something big to come in the next couple of weeks. There’s an array of factors which contribute to their stance, and I too believe, most are logical and corroborate our previous analysis of seasonality and people’s interest in points 1 and 2 respectively.

What is the Bitcoin Price Telling Us?

For the past few weeks, volatility has been at its lowest levels since 2016. That means price swings are very unlikely to happen, as long as volume stays low.

Although you might think the outlook is that of a bearish market, one thing we need to understand is that tipping points happen whenever you’re not expecting them.

Currently, bitcoin is clearly oversold. The fact there’s not much interest in trading bitcoin (look at volume) also means price swings are very unlikely to happen (look at volatility). Both factors aligned with people not being interested in bitcoin (point 2) shows a very pessimist view.

However, this was the exact outlook of the cryptocurrency market immediately before every major bull-run. Just look at last year’s!

Now, to enter a proper bull-run, a few check-boxes need ticking, as our dear TA experts point out:

  1. Fresh cash must enter the market through exchanges, exponentially increasing volume (sorry OTC traders, it’s time to move into the real world).
  2. With a proper increase in volume, short-sellers will go bust, increasing the short-term price of bitcoin.
  3. Bitcoin needs to break-out and annihilate the current price-wall sitting around the USD $8000 level.
  4. The 100-day moving average needs to surpass the 200-day moving average.
  5. The 50-day moving average needs to surpass the 100-day moving average.

We can obviously infer that a price increase will lead people to regain interest in bitcoin and start purchasing again due to FOMO.

Conclusion

If a bull-run is about to come that would be a great indicator of the current bitcoin seasonality, which may soon be gone, as the more cash enters the cryptocurrencies market, the less impact one single dollar has on the overall price.

Meaning, the higher the overall volume and the more distributed it is, the less likely manipulation of bitcoin prices is to happen, making it a more stable medium of exchange.

Is the bullish season open for business? No one really knows. Looking at different indicators seems to point in that direction.

The only thing we ought to do is to wait patiently and see.

If you’re looking to learn more about different cryptocurrency projects, check this article.

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