I maintain that historical price charts are great for predicting the past. This is meant to sound like a joke but it isn’t. Price charts are maps and maps give people a guide to the future because they give context. The markets are not trendless and while they might not often give out hints of the immediate future they certainly tell the story of the past and the story so far.
This is bitcoin's chart up to July 13, 2018. Bitcoin is in a bear market, currently clearly trending lower:
Bitcoin has been a bubble for sure and that bubble has burst, just like the dotcom bubble before it. Just like the dotcom crash, if you can buy at the bottom you will make a killing going forwards.
To my eyes this chart says there is another final leg to fall but that is opinion. What I want to see is a bottom in the market that follows on a final crescendo of collapse. You might say we have had that already, but I don’t think we have. I want to see headlines saying “Bitcoin is dead” after a final leg down. This will signal a bottom as it has on many previous occasions. “The Death of Bitcoin” as a MSM headline will be the point I will be serious about loading up.
So is there anything else in this chart that gives us a clue to the future? Let’s tweak our price chart lens.
How about this?
This is a log chart and it shows that bitcoin and crypto have been growing and behaving logarithmically. This is a field mark of viral growth. Few things have this growth potential; crudely it’s a compound growth of 26% per time period. Ten periods of 26% gets you to a total 1,000%.
As an aside, this is the portfolio profit rate that got Warren Buffett to be one of the world’s richest men.
This non-linearity is exciting because if this growth is to continue, bitcoin can really get back to $20,000 a coin, $200,000 a coin, $2 million a coin...because if the market mechanism of the asset remains viral that is the way it spreads.
This shows six years of log power trading and growth.
So how about this as a price target:
With a couple of hundred billion the total cryptocurrency market cap (take out all those funky non-minable tokens and non-decentralized coins) and you can certainly see another x10 is doable. As such, if bitcoin is still behaving logarithmically it will soon be on its way to the moon again. It’s an amazing conjecture but I can see it being on the cards.
So the trade is 100% loss versus a good chance of 1,000%+ gain. As long as you right size your position it’s an irresistible trade.
However, if you are greedy like me you want to see the bottom of the market or at least signs this bear market trend is over and for now we are not there yet.
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Clem Chambers is the CEO of private investors Web site ADVFN.com and author of Be Rich, The Game in Wall Street and Trading Cryptocurrencies: A Beginner’s Guide.