Bitcoin could be in for a near repeat of history.
After setting new all-time highs in 2013, we experienced a year long bear market in 2014 where price fell back to long-term support. The next year and a half was characterized by a moderate recovery. Finally, in late 2016, price began sharply rising back to the previous high around $1100. It was then rejected from this level and swiftly corrected 35% back to support. From here, in 2017, we were able to see the legendary bull run that sent Bitcoin up on a 20x tear.
Applying this cycle to the past few years, price action is remarkably similar. A year long bear market in 2018, a moderate increase in 2019-20, and the sudden retest of the ATH we are seeing now. If history is to be trusted, we are due for a rejection from 20k before a mega-bull run in 2021. This is why I am setting my one-year price target at 120k, around where the long-term resistance arc is projected to be by then.
However, in spite of the positive outlook, this would also mean that a significant correction is likely to happen very soon. If such a Jan 2017-esque drop does occur, I believe it will confirm the 2021 bullish hypothesis and prevent a fantastic buying opportunity. In anticipation of this event, I have sold 40% of my current position.
The lines drawn on this chart represent my trading strategy for approaching the aforementioned possibility:
Because of the increased presence of institutional investors, it is difficult to determine how low we will dip. A fall to long-term support would bring us back to 7-8k, around a 60% decrease. However, this seems too an extreme to actually occur. Another possibility is a fall to a medium term support that has formed, shown by the light red arc. This would result in a drop of about 40%, still larger than the historic amount. If the dip is more moderate, significant support from 12-16k would likely keep it afloat at these levels.
Following this event, historical evidence makes me very confident that buying will surge enough to quickly return the price back to highs. If everything goes right, we could very well be on the path to 100k plus in 2021. It is of course important to remain skeptical, though, and look for any deviations from this projection.
After setting new all-time highs in 2013, we experienced a year long bear market in 2014 where price fell back to long-term support. The next year and a half was characterized by a moderate recovery. Finally, in late 2016, price began sharply rising back to the previous high around $1100. It was then rejected from this level and swiftly corrected 35% back to support. From here, in 2017, we were able to see the legendary bull run that sent Bitcoin up on a 20x tear.
Applying this cycle to the past few years, price action is remarkably similar. A year long bear market in 2018, a moderate increase in 2019-20, and the sudden retest of the ATH we are seeing now. If history is to be trusted, we are due for a rejection from 20k before a mega-bull run in 2021. This is why I am setting my one-year price target at 120k, around where the long-term resistance arc is projected to be by then.
However, in spite of the positive outlook, this would also mean that a significant correction is likely to happen very soon. If such a Jan 2017-esque drop does occur, I believe it will confirm the 2021 bullish hypothesis and prevent a fantastic buying opportunity. In anticipation of this event, I have sold 40% of my current position.
The lines drawn on this chart represent my trading strategy for approaching the aforementioned possibility:
- The gray line underlying the recent rise has served as a short term support. Once the current price has ruptured this line, it is a clear indicator that the current run may be ending and a correction beginning. At this point, I will very strongly consider additional selling. The line is set to intersect the 2017 ATH on 11/28.
- From there, each green line represents roughly a 5% decrease from the potential high. At each of these levels, I will be re-purchasing an equivalent 10% of my original position.
Because of the increased presence of institutional investors, it is difficult to determine how low we will dip. A fall to long-term support would bring us back to 7-8k, around a 60% decrease. However, this seems too an extreme to actually occur. Another possibility is a fall to a medium term support that has formed, shown by the light red arc. This would result in a drop of about 40%, still larger than the historic amount. If the dip is more moderate, significant support from 12-16k would likely keep it afloat at these levels.
Following this event, historical evidence makes me very confident that buying will surge enough to quickly return the price back to highs. If everything goes right, we could very well be on the path to 100k plus in 2021. It is of course important to remain skeptical, though, and look for any deviations from this projection.
Trade active:
As anticipated, Bitcoin fell below the gray arc on this graph and began a correction. As of right now, we have passed through 3 of my buy zones. If the price stays at around this level, I will be purchasing additional GBTC when the market opens tomorrow.
In the early 2017 drop, the first day of the correction closed about -12% from the ATH with a max drawdown of about -22%. If this is to be followed for the current event, we will close today at about $17,250, and draw down at some point to $15,300. So far we have seen the low 16's but not yet 15's. If we do not see this low today, it could be a sign that this correction with not be as deep as the one in 2017, with a max decrease of only 25-30%. This would put the low at the 14k level.
In the early 2017 drop, the first day of the correction closed about -12% from the ATH with a max drawdown of about -22%. If this is to be followed for the current event, we will close today at about $17,250, and draw down at some point to $15,300. So far we have seen the low 16's but not yet 15's. If we do not see this low today, it could be a sign that this correction with not be as deep as the one in 2017, with a max decrease of only 25-30%. This would put the low at the 14k level.
Trade active:
While we await Bitcoin's next move, I have noticed another pattern relating to the Jan '17 crash. The first leg of that correction took price down to a baseline of around $900. This price is equivalent to the first bounce-back peak in Jan '14 following the end of the 2013 bull run. After stabilizing at this level for a few days, the second leg took Bitcoin back down to the mid 700s, the high it reached during its run in Jun 2016.
Similarly this time, this correction has sent prices down to the mid 16s, comparable to the initial recovery in Jan 2018 that followed the first run to 20k. If history repeats, we should see stability between 16k and 17k for the next few days. This may then be followed by a second leg down to a previous high. This high could either be 14k from Jun '19 or 12k from a few months ago. This should be the bottom, and I will buy heavily if either of these prices are reached.
Similarly this time, this correction has sent prices down to the mid 16s, comparable to the initial recovery in Jan 2018 that followed the first run to 20k. If history repeats, we should see stability between 16k and 17k for the next few days. This may then be followed by a second leg down to a previous high. This high could either be 14k from Jun '19 or 12k from a few months ago. This should be the bottom, and I will buy heavily if either of these prices are reached.
