Bitcoin tends to post the same bullish pattern over and over again.
I call this pattern...
The Volcano.
It looks like this:
2017
2019
2020
Same pattern, different year.
This pattern plays out over and over again in relatively predictable ways. In fact, it seems to be getting even more predictable as time goes on. Q4 volcanos start in October and blow-off in January. Summer runs start in May and end in September.
They take about three months to ramp up, but most of the volatility happens in the last three weeks, with the last week being extremely volatile and unstable.
Leading up to a volcano seems to be consistent.
It's after the top blows off that the timelines become variable. In 2017 during the mega bubble we see it took the entire year of 2018 to deflate. During the summer Bakkt pump/dump it took much less time to deflate: only a quarter-year. It appears that the run we are in currently may deflate even faster than that. This would be extremely bullish.
Why is crashing bullish?
Because we need to get back to our support line in order to create a stable base for the next run. The sooner we get back to the doubling curve the better. $20k is the obvious target.
2021 Bitcoin Doubling Curve
| Jan | Feb | Mar | April | May | June |
|---|---|---|---|---|---|
| $13867 | $14933 | $16000 | $17067 | $18133 | $19200 |
| July | Aug | Sept | Oct | Nov | Dec |
|---|---|---|---|---|---|
| $20267 | $21333 | $22400 | $23467 | $24533 | $25600 |
Even though the baseline support value of Bitcoin is $14k at the moment, we probably aren't going to see those kinds of prices unless we get some kind of legendary black swan event. All the corporations that have been buying lately are basically honor bound to defend the $20k support line that we consolidated at for so long. Many people will see this as a very good buying level, in terms of both unit-bias and actual support. We absolutely need to test previous all time highs as support before we can move forward.
Prediction
Given what happened today it appears as though we are going to bounce off $30k again. If we dip lower than that $28k should easily hold in the short-term.
I do not think we have enough momentum to get back up to $40k at this point. It looks like $35k is going to flip to resistance and we are going to get rejected. I'll probably sell off a small chunk when we get back near $35k. Volume is good, back up to 50k, so the market is still healthy and volatile.
Timelines
Whereas it took the 2019 run a full three months to deflate, it looks like we could get back to $20k as soon as February. Why? Well, in 2019 it took 2 full weeks for the dead cat bounce to near all time highs. During this most recent run that same dead-cat bounce only took 5 days to 30% retrace and bounce back up to $40k.
This market is moving extremely faster than usual, perhaps due to the fact that it peaked so much later than a normal run. Normally we would expect a peak in December but we got it in January instead. Perhaps the market is playing catchup.
Get ready for everyone to blame Chinese New Years when we inevitably dump further. They spend so much money during that time. China loves the new year. Plus all the miners there had their stake locked up from regulations.
If not February, then late March, and everyone is going to blame tax season. Q1 is always bad for Bitcoin. These cycles were going to complete no matter what the reason given is.
April Fools is no Joke!
Once again, late March and early April are usually a great time to buy, especially if the market had recently crashed. Seeing as we're in a mega-bull run year (all hail 2021) the chance that we get a sick run up during summer is pretty high. Should that happen expect a 30% retracement in September and then on to potentially $300k Bitcoin come Q4.
When considering that Bitcoin could easily hit $300k (x10 from here) is it really worth trying to game the system and trade this market? Probably not, I'll likely get wrecked as always, but it's fun to try and it's fun to gamble. One of these days I'll figure it out.
Until then, tread carefully!
As one final note, I'd like to point out how ridiculous everyone has been being lately. The price predictions have been absolutely absurd. People talking about $10k Ethereum before even considering $2k? Laughable.
After today's dump, hopefully everyone starts grounding their expectations to reality where they belong. The economy is in for a very bumpy road, and Bitcoin is intrinsically linked to the economy, even if it is a unicorn asset doubling in value every year. Remember, we can still crash all the way down to $14k and Bitcoin would still be a unicorn asset.