Technical analysis is a tool that traders use, that simply uses historical data to predict future price action. With the crypto market being both highly unpredictable and still very much in its infancy – this is more difficult than usual. However, we can use significant historical events such as Halving’s and All-Time Highs to form a hypothesis of Bitcoin’s intermediate future.
Bitcoin Liquidity Index – LOG Scale
We have used the Bitcoin Liquid Index (BLX) as a tool to showcase our analysis. BLX is able to provide a real-time reference rate for the price of Bitcoin, as well as ensure the most exact spot due to its data sources. The company behind the index captures different data sets from major exchanges as well as auditing the value independently by using extensive financial accountability principles.
We also highlight the fact that we are using logarithmic scales instead of linear ones. The first reason to make use of the LOG chart of BLX is due to the ultimate purpose of the analysis (showing a long term projection). Economists use LOG charts when:
1) the asset is very volatile
2) analysis is being provided on a larger timeframe
When traders want to focus on large price movements, they use LOG data to get the best out of the percentage of the moves (and not the monetary value of it).
LOG prices are better than AUTO as the linear price scale has useful volatility for the overall trend. With logarithmic prices, analysts use the percentage of change to plot data points due to the fact they are not equidistant. In addition, the scale shows less severe price variations. The majority of long-term trading software uses those types of scales to present a cleaner trend.
Halving’s and Historical Highs
We can break down the respective phases into the following:
Green – Bull market
Red – Bear market
Blue – Accumulation
Yellow – Expansion
From the historical data, we can see one very clear thing – this is that the peak of a Bitcoin Bull run has always come AFTER the halving. This may come as a surprise to many, with investors hoping that this may occur before the end of 2019. While nothing is for definite in the crypto space – this would seem highly unlike based on historical performance.
Next Bull Run Peak
If Bitcoin is to continue its historical movements, it would suggest that the peak of the next bullish cycle, which starts after the 2020 halving – would be somewhere around July-August 2021. With BTC’s price likely to continue to rise from now until then. The current $20,000 high is the key level during the next cycle.
We can also see that in recent times XRP and ETH have been in sync with BTC’s movements – but peaking AFTER Bitcoin. In both peaks that the 2 major Altcoins saw, XRP peaked first – and this was followed shortly by ETH. This is important to note for investors who are holding Ethereum-based tokens.
Should history decide to repeat itself – we could once again see two phases of Altcoins – the first to coincide with BTC reclaiming $20,000, and the second after BTC peaks during the next bull market. We must emphasise that this is purely based on historical analysis – and by no means guaranteed. It is essential to note that the adoption of the crypto space is likely to speed up, as demand continues to grow in a class with finite supply. What is very clear however, is that the entire space is still very much in its infancy, and there is plenty room for not just Bitcoin, but all valuable projects to continue to grow.
While it is not a perfect science by any means, fundamental research into all investments should come as a bare minimum to all investors. One key indicator that the Bear market has provided is to see the team’s developments during such a tough phase. If the project has not only managed to last, but also continues to build and develop through it – this should certainly be seen as a positive.