The ardent supporters of the buy-and-hold strategy may have difficulties. Compared with the maximum values of December 2017, "digital gold" has been reduced by more than 80%.
Those who are not so successful in the margin, and those who did not arrive on time in Fiat and steyblkoiny, probably want to quickly discover when the downward trend in the market will end. The latter, by the way, has overcome the recession 2014-2015 for its duration.
However, with an investment horizon of more than 4 years, the Bitcoin Sharpe index is still higher than that of US stocks, real estate, bonds, gold, emerging market currencies and oil. In other words, for a long-term investment, Bitcoin remains the most profitable asset:
However, with respect to medium-term forecasts, they are clearly ambiguous. For example, cryptanalyst Murad Makhmudov updated his forecast to the downside:
1 / Why I believe that the famous 200-week mobile support average of the last bearish cycle
– Murad Mahmudov 🚀 (@MustStopMurad) January 31, 2019 р.
According to him, the MA 200, which is considered the last frontier, will not be maintained, and the price of BTC will "feel" at the bottom near the $ 2,000 mark this summer.
The founder of the services of Scup and Sprinklr, Renato Shirakashi, is much more optimistic. Based on a series of indicators, he concluded that the bull market is already on the threshold. On the other hand, he admits that the price can still remain for some time in the range of $ 3000-5000.
A moderately conservative forecast by Christopher Brookins, the founder of hedge fund Pugilist Ventures. ForkLog magazine offers an abbreviated translation of your article.
Since the end of 2018, the movement of prices has remained clearly negative, surprisingly for those who expected the historical price in the fourth quarter.
The fall in prices, apparently, is largely due to the negative market and massive sales. As a result, the most significant support level for last year was around $ 6,000 (the black line dotted in the table below):
The pressure of the bears for several weeks kept prices in the deep oversold zone, as can be seen in the oscillators RSI and SWTO.
So far, the indicators of these indicators show a downward trend. This may indicate a further decline in prices at the beginning of the first quarter of the current year. Therefore, Bitcoin's market value will continue to search for its fund.
Volatility ≠ Prices on the rise
In 2018, many market experts argued that, historically, in the fourth quarter, there was always a significant increase in prices, especially from mid-November to early December. However, what many considered a natural increase was nothing more than a planned increase in volatility.
The chart below illustrates the historical trends of average daily volatility on an annual basis:
Therefore, many Bitcoin optimists mistakenly expected that greater volatility would undoubtedly mean an increase in prices.
The graph shows that trends in Bitcoin volatility since 2013 follow a predictable path, with the culmination of the range of price fluctuations in the fourth quarter. This dynamic manifested itself again in 2018. Therefore, volatility contracted from October to mid-November (vertical dotted lines in the BTC / USD chart). The decrease in price fluctuations, as a rule, precedes strong movements. But this time, luck was clearly on the side of the bears.
If we analyze the general trend of 2018 (obviously downward), the compression of price volatility, its historical patterns, as well as the fundamental indicators, it is clear that the probability of a breakdown of prices was extremely high.
These indicators can be very useful for the reason of movements and price patterns. However, since Bitcoin had few market cycles (n = 10), these instruments must be treated with a certain degree of skepticism.
Castle Island Ventures partner and co-founder of CoinMetrics Nick Carter and Antoine Le Calves of Blockchain.info recently introduced the capitalization concept.
The difference between this capitalization and the market to which we are all accustomed is that "instead of counting all the coins extracted at the same current price, UTXO is added". [выходы неизрасходованных транзакций]. The values of these exits are multiplied by the BTC price, which was at the time of the last movement of the respective currencies ".
David Pewell and Murad Makhmudov did an excellent job explaining all this in their article.
The visualization based on CoinMetrics data will ensure that the differences between the realized capitalization and that of the market can be seen at a glance, even with a small sample of historical data.
The points of intersection between the market capitalization and what is done can be interpreted by analogy with the "golden crosses" [например, как у линий индикатора Stochastic — прим. ForkLog]. Therefore, if the market capitalization curve crosses the capitalization line made from the bottom up, this indicates the beginning of a new upward cycle. If the lines intersect with each other in reverse order, this indicates the imminent completion of the bearish cycle.
Pay attention to the chart below: the market capitalization indicator turned out to be lower than the capitalization values made on December 28, 2014. It remained under this line until October 28, 2015, until the period of high volatility began of the price of Bitcoin.
In this case, the period of greatest volatility coincided with the increase in the price of Bitcoin, which marked the beginning of the bull ramp.
This time the market capitalization fell below that of November 20, 2018. Therefore, if history repeats, investors can expect a continuation of the price reduction in 2019 alternating with the plan. At the same time, a new bull rally will begin around November-December of this year.
Using the realized capitalization, you can create an oscillator that allows you to determine the Bitcoin market cycles. One of these indicators is the market capitalization ratio that has been realized (Market Cap versus Realized Cap, MVRM).
For example, historically, the MVRM value below 1.0 indicates that Bitcoin is undervalued. If the value of the indicator is above 3-4, then the asset is significantly overvalued. Currently, MVRM is around 0.79, while the historical minimum of the indicator is set at 0.56:
Despite the fact that Bitcoin is undervalued, there is still enough space to continue the downward movement of MVRM, which can last until approximately the fourth quarter of 2019.
The relationship between the volume of online transactions and the number of active addresses (TAAR)
This relationship acts as an indicator of "equilibrium" of Bitcoin's price at its fundamental value. The volume of transactions and the number of active addresses characterize the quantitative and qualitative growth of the Bitcoin network.
If TAAR and the price are located close to each other, this means that the market value and fundamental indicators are in balance. If the TAAR and the price deviate significantly from each other, this indicates that the price is out of balance, which ultimately leads to its decline.
The last active sale in the market has reduced the gap between the price and TAAR, which has persisted since the fourth quarter of 2017:
Then, in the logarithmic chart, you can see that the price rebounded on the 30-day moving average (MA) TAAR line twice in 2018:
Note that the last bounce occurred recently and it happened quite fast.
The final price increase in prices before finding a solid fund is likely to coincide with a decrease in the market value indicator in MA 30. Then, the price will recover above this level and TAAR resumes the uptrend.
Like MVRM, TAAR is an oscillator that visualizes similar processes. Historically, a 1.5 ratio of this indicator indicates undervaluation; the range of 1 to 2 is considered "safe", and marks below break-even point 1 indicate an overvalued asset.
Earlier this year, TAAR is at ~ 0.70, indicating that Bitcoin is overvalued. However, the general trend is encouraging, since it is aimed at brand 1.
Although recent market movements were markedly negative, they paved the way for the start of Bitcoin's price stabilization process. This process is supported by data from various indicators.
According to the previous MVRM analysis, if history repeats, the price is likely to fall further. Then it will stay until the end of the fourth quarter in the apartment, after which a new bull market will begin. The confirmation of this thesis will be the increase in the values of the TAAR oscillator above 1.50 (the undervalued area) at the threshold of the fourth quarter.
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