Given the recent parabolic move in Bitcoin, I thought I would take a look at previous parabolic moves.
Disclaimer: The below is by no means an exact calculation, but more some things I noticed and wanted to share. Also, the dataset is way too small to get to any exact conclusions. Also, this is my first publication ;-)
PAST
I started with identifying all the parabolic moves I could find on the daily or weekly timeframes and draw best fitting arcs (yellow A-G), making sure the arcs would only move up and right (no down or left movement allowed).
Then I added the measurements of the move up and the following maximum move down (white dashed arrows), giving me percentages. Now, the markets are not exact, so these measurements should me looked at in a rough way.
What I first noticed, was that the bigger the parabolic movement up, the bigger the crash afterwards (percentage wise). Let's see if we can more details on that.
First, I looked at A and B. They are very similar in the up move (200 vs 250%), and also quite similar in the down move (50-55% respectively). Let's just say for simplicity that a 250% parabolic up move results in a 55% down move.
Then I looked at C and D. Very similar up moves (roughly around 2000%), and very similar down moves (roughly 85%).
Now we get to E: the move up is only about half of A or B, and also the down move is less: about 40%. So, if the up move is twice as big (120 vs 250%), the down move is only about 15 percentage points bigger (40 vs 55%).
Did I already mention that these numbers are not exact, and that I'm rounding them a lot? ;-)
Now let's compare C & D with A & B: An up move of about 8x bigger (250 vs 2000%), results in a down move that is 30% percentage points bigger (85 vs 55%).
Now, I looked at F, the mother of all bull markets in BTC. This curve show an increase of roughly 5500%, more than 2.5 times the increase of C & D. We don't know what the full down move is, since we're not sure the bear market is over. Now for simplicity's sake, let's just assume it is 2x the increase (way off, but this is just to illustrate an idea).
So:
E: 1x up move = -40%
A & B: 2x up move = -55% (-15% extra)
C & D: 16x up move = -85% (-30% extra; 8x compared with A & B, 16x compared with E)
F: 32x up move = ?
Now, looking at the above, one would conclude that the drop after F is probably larger than the drop after C or D, because the up move is also bigger. How much? Well, it's not linear and it has to be less than 100%, so let's see what we can find.
I decided to plot the few datapoints we have in a graph, drawn by hand ;) To me, it looks like a parabolic curve, although more datapoints would be better.
PRESENT AND FUTURE
As you can see in the graph, the projection for the drop of our parabolic F move hardly fits on the graph, but the estimated drop would be something like 90-95%. I drew some orange arrows in the chart from the top of F to 1830 and 1360 levels, and those ended up being 90-93%, both likely targets (long term). We already dropped 84% to the 3000 area, which was also an area of support.
Now we have started another parabolic move from 3k upwards, and as of writing we are at the 11k level. So far that is a 260% move up. Where will this move end? I decided to draw a best fit trend line (magenta) from 2012 through 2017 and right through the point where we dropped from 6k to 3k. Right now we are very close to this trend line and I think this will be big resistance, just like the diagonal trendline (in red) was when we got to 20k. If this magenta trend line happens to be the top of this parabolic move, and comparing with the previous parabolic moves, I expect a drop of about 55%. Targets of 6k (50%) and 5k (60%) are likely support areas here.
Now what will happen in the future... nobody knows, but based on the parabolic curves I can see at least a bullish and a bearish scenario, assuming that we can't break the magenta trend line:
BULLISH
We drop about 55% from around the 11k level and stay above the green supporting trend line. This could set us up for another parabolic move, just like we got a big move F after E. This could take us to 250-500k bitcoin in a couple of years.
BEARISH
We drop about 55% from about the current 11k level and eventually drop below the green support line. I think it is then very likely we go to 1800-1300 levels and we'll have some more bear market for some years to come.
If we happen to drop 85% from the current parabolic move (G) we end up at the 90-95% target for curve F (but that doesn't fit the idea).
Disclaimer: The below is by no means an exact calculation, but more some things I noticed and wanted to share. Also, the dataset is way too small to get to any exact conclusions. Also, this is my first publication ;-)
PAST
I started with identifying all the parabolic moves I could find on the daily or weekly timeframes and draw best fitting arcs (yellow A-G), making sure the arcs would only move up and right (no down or left movement allowed).
Then I added the measurements of the move up and the following maximum move down (white dashed arrows), giving me percentages. Now, the markets are not exact, so these measurements should me looked at in a rough way.
What I first noticed, was that the bigger the parabolic movement up, the bigger the crash afterwards (percentage wise). Let's see if we can more details on that.
First, I looked at A and B. They are very similar in the up move (200 vs 250%), and also quite similar in the down move (50-55% respectively). Let's just say for simplicity that a 250% parabolic up move results in a 55% down move.
Then I looked at C and D. Very similar up moves (roughly around 2000%), and very similar down moves (roughly 85%).
Now we get to E: the move up is only about half of A or B, and also the down move is less: about 40%. So, if the up move is twice as big (120 vs 250%), the down move is only about 15 percentage points bigger (40 vs 55%).
Did I already mention that these numbers are not exact, and that I'm rounding them a lot? ;-)
Now let's compare C & D with A & B: An up move of about 8x bigger (250 vs 2000%), results in a down move that is 30% percentage points bigger (85 vs 55%).
Now, I looked at F, the mother of all bull markets in BTC. This curve show an increase of roughly 5500%, more than 2.5 times the increase of C & D. We don't know what the full down move is, since we're not sure the bear market is over. Now for simplicity's sake, let's just assume it is 2x the increase (way off, but this is just to illustrate an idea).
So:
E: 1x up move = -40%
A & B: 2x up move = -55% (-15% extra)
C & D: 16x up move = -85% (-30% extra; 8x compared with A & B, 16x compared with E)
F: 32x up move = ?
Now, looking at the above, one would conclude that the drop after F is probably larger than the drop after C or D, because the up move is also bigger. How much? Well, it's not linear and it has to be less than 100%, so let's see what we can find.
I decided to plot the few datapoints we have in a graph, drawn by hand ;) To me, it looks like a parabolic curve, although more datapoints would be better.
PRESENT AND FUTURE
As you can see in the graph, the projection for the drop of our parabolic F move hardly fits on the graph, but the estimated drop would be something like 90-95%. I drew some orange arrows in the chart from the top of F to 1830 and 1360 levels, and those ended up being 90-93%, both likely targets (long term). We already dropped 84% to the 3000 area, which was also an area of support.
Now we have started another parabolic move from 3k upwards, and as of writing we are at the 11k level. So far that is a 260% move up. Where will this move end? I decided to draw a best fit trend line (magenta) from 2012 through 2017 and right through the point where we dropped from 6k to 3k. Right now we are very close to this trend line and I think this will be big resistance, just like the diagonal trendline (in red) was when we got to 20k. If this magenta trend line happens to be the top of this parabolic move, and comparing with the previous parabolic moves, I expect a drop of about 55%. Targets of 6k (50%) and 5k (60%) are likely support areas here.
Now what will happen in the future... nobody knows, but based on the parabolic curves I can see at least a bullish and a bearish scenario, assuming that we can't break the magenta trend line:
BULLISH
We drop about 55% from around the 11k level and stay above the green supporting trend line. This could set us up for another parabolic move, just like we got a big move F after E. This could take us to 250-500k bitcoin in a couple of years.
BEARISH
We drop about 55% from about the current 11k level and eventually drop below the green support line. I think it is then very likely we go to 1800-1300 levels and we'll have some more bear market for some years to come.
If we happen to drop 85% from the current parabolic move (G) we end up at the 90-95% target for curve F (but that doesn't fit the idea).