While we're going through the equilibrium phase of Bitcoin price movement, I can't help but shake the memories of the bubble of 2013/2014 and the long bear market that occurred afterwards. Let's compare the bubble charts and think about the future.
2013/2014
Bitcoin had several major bubbles so far, but one of the most famous was the 2013/2014 bubble when Bitcoin first peaked to about $1200 each, only to subsequently slowly dwindle back all the way to the $200 range when it was finally declared dead often enough to disappear from most people's radars.Of course, results from the past offer no guarantees for the future and none of this is financial advice, but all things considered the historical price movement of Bitcoin does provide us with some relative insight into what might happen or is happening.
I took some screenshots from tradingview to compare the two bubbles side by side, as I like to do from time to time. Take a moment to look at both charts and notice the similarities:
A few things stand out to me. First, it's very noticeable how both charts have more or less the same shape. In both cases Bitcoin went parabolic, though it does appear the 2017 bull run was more stretched out and more gradual from the skyrocket that happened in 2013. Both seem to have an equilibrium pattern playing out, with a set of fast declining lower highs and what appears to be a series of higher lows gradually forming.
I remember this period well from back in the day. Enthusiasm had dwindled a little bit, but it was generally still high and another bull run was expected once 'the correction' was over.
Of course the price in 2013/2014 fell even lower after the above chart, leading to the infamous long winter in crypto. Still, the bulls were right: After the correction is done, we'll go back up. It just took a much longer time than anyone expected. It took about three years before Bitcoin would reach and breach it's previous all-time-highs. See the chart below to see how it played out.
If Bitcoin today follows the same pattern as in 2013/2014, then I consider it to be possible, perhaps even likely, that we'll go down much further than we have gone so far. In the above chart I made a quick & dirty sketch of where, by comparison to last time, we may be currently in the pattern. If the same time length is used, it could mean that we may drop further down and it may take up to one year to get back to the levels we are at now.
Notice how in the chart above Bitcoin dropped as much at 50% from the point where, according to the pattern, we may be again today.
When I look at market sentiment, as I said above, I feel like deja vu in some ways. Sentiment is still relatively high in crypto, which is both good and bad. It's good because it helps it's popularity, but truthfully... it's terrible for the market price. As long as enthusiasm remains high, there will remain some buying pressure to keep Bitcoin from truly tumbling down. This is what happened in 2014 too - hodlers were too convinced in hodling and remained stubborn about the recovery and their stubbornness only dragged out the process of Bitcoin bottoming out. It took many months of bear market to truly dishearten even the most confident bull. Forget about the dips you've known so far - time and patience is how you truly shake out the weak hands.
( source )
By the time we truly bottomed out last time, there weren't any believers left to 'Buy the Fucking Dip'. There was no huge buying spike when Bitcoin dropped to $200. No, instead people said you'd be crazy and several years late with going that route. Bitcoin was dead.
When I look at the current market, we're simply not nearly there yet. The FUD and bears are strong but sentiment is simply too high. As long as there are armies of people waiting for Bitcoin to drop to X amount of dollars in order to buy in, it's not going to be able to bottom out. The market doesn't nearly feel desperate nor boring enough yet to have bottomed out.
PERSONAL PREDICTIONS
Now, in my opinion there's two ways this may play out. Either we follow last bubble's pattern and we still have many months of bearish action to go through, or 'this time it's different'. I put the latter in quotation marks on purpose, in order to make you stand still by the validity and strength of the position.It could be so, that this time it's truly different. There's more technology, more wealth, more investment, more development, more media attention and more everything in Bitcoin and blockchain now. Not to mention the diversity in altcoins and the excitement they bring with them. Still, I feel like every bubble graph looks the same and in my experience generally 'this time it's more of the same' applies more often than 'this time it's different'.
Let's look at the Log chart in comparison, often overlooked but oh-so-interesting and useful:
The Logarithmic chart takes away the time-component and instead focuses on price fluctuations only. It paints a different and some say more accurate picture of price movement. From the logarithmic chart a sort of channel becomes obviously clear between the two peaks. It also shows how we're still quite a bit away from reaching the bottom of the channel, and if you continue the line and guesstimate where it would hit the bottom, I would instinctively put the bottom somewhere between $4-5K per Bitcoin. Perhaps even a bit lower than that.
The Logarithmic charts are actually significant. You may have heard of 'famous' investors who 'correctly predicted Bitcoin would pass $10K' and are assumed to be geniuses, but really what they did is just simply apply the Logarithmic chart to predict the market. The Logarithmic chart is, for example, also the basis for the predictions that Bitcoin will pass $100K per Bitcoin in 2020/2021. It's merely a continuation of the pattern we have been following for the past years.
Take for instance this couple-years-old Bitcoin prediction which I found on Tuur DeMeester's Twitter feed:
As you can see, the Logarithmic chart has been rather spot on in predicting the future price. And if indeed, the same pattern is to be followed, we will hit and surpass $100K per Bitcoin. But in my opinion it would require a much longer bear market with a much lower price per Bitcoin.
Ever since hitting the peak, I've kept my ideal buy-in price at about $4500 per Bitcoin. We haven't hit that yet, and sometimes it looks like we'll never hit it. But I just can't shake this feeling that we just still might hit it and it would in fact be surprising to me (although positively so!) if we didn't eventually drop down to it. Also, I still feel that the bottom of exactly $6000 that we hit earlier this year is not the true bottom - it just felt unnatural. And far too soon.
Now, I don't want to advice anyone or tell you what to do, merely to help people expand their viewpoints. It is also good to point out that I am in no way a professional trader or technical analyst and all of these opinions are merely my own, based on my own experiences.
Although I consider it likely that we may drop lower than we are now, I am still not confident enough to sell in order to profit from it and I would recommend against you trying. Simply put: my experience has taught me that the risks of missing the train far outweigh the risks of missing out on maximizing trading potential. I could very well double my stack if I sold now and re-bought later, but it does not compare to giving up my entire stake and being left behind. This is the lesson I learned as a hodler.
What I do recommend is to keep some money on the sidelines, just in case the logarithmic trend continues. I surely will be. If Bitcoin drops to $4500 or below, I'm definitely buying. That is what it truly means to 'buy the dip'. I made this commitment to myself ever since it first passed $7000 and I intend to keep it. But I also know that when it actually does drop that low I will probably feel very different and instead would prefer to not 'throw my money away' (as it would seem at that point). With this knowledge in mind I have decided I will go against my future self and stick to my plan to buy even when the market is bleak. Or especially when the market is bleak, rather. But for now? I don't think it's nearly bleak enough yet.
I hope I am wrong, though. I'd love to visit the moon sooner rather than later...