Bitcoin, 2014? - Back to the future - It's your kids, Marty!
Updated
Good day everyone, it's Muffin Mike and I'm back to look at Bitcoin,
I have been keeping up with popular views over the weekend and there seems to be a bit of a throwback trend, funnily the same chart comparison was being shared around Reddit a month or 2 ago, but it's back again and whilst I will admit it has it's merits to compare past corrections, I do have some serious problems with expecting the market to hit Ctrl + C then Ctrl + V.
First things first I feel it's worth mentioning that the trendlines I have drawn above, like last time, is based on the daily price close using Heikin Ashi candles to show a solid price range to artistically indicate a trend. So don't be too religously attached to these lines, I just have a personal preference for viewing something as volatile as Bitcoin in this we way.
Problem 1 - The Pattern itself
My first thoughts when I look at a corrective downtrend such as the one above is how easily we can be drawn into what we see as an identical pattern. This is of course the main similarity for both charts, but is this significant? Both have followed a similar path, but one could just as easily argue we have bounced off support during the downtrend and followed an established % retrace pattern, indeed similar patterns can be seen in other corrections across assets so I wouldn't define this alone as 'spooky'.
Problem 2 - Where are we?
IF we are to believe that history is repeating itself then we need to understand at what point we are presently at. We can see above that after we broke out of the decending triangle on the weekly view that we had short movement up followed by about 3 weeks of consolodation, before a larger uptrend took hold that held us up for about 8 weeks. So if we are indeed taking on the same pattern, we are surely not about to crash down as many are claiming.
It is this far that i'm inclined to agree with, this scenario does match my own prediction that we will see a spring uptrend followed by another correction, indeed all of the indicators on the weekly view is not telling us that this run is over, quite the opposite. But how significant is this really? Expecting the market to behave exactly in a copy and paste manner to the extent of that correction simply because it's gone down and now it's moving up again is problematic to say the least, many things have changed since 2014.
Problem 3 - Variables
This is the elephant in the room with making a side by side comparison
The run up of Bitcoin in late 2017 saw a huge interest in Bitcoin and a fever of speculative purchase, pushing the price to further extremes. Whilst we cannot of course rule out the role of manipulation here as you could argue in any market, the diffrence between the amount of volume this would require in 2017 across multiple exchanges means this alone cannot be completely accredited to the rise.
2014 however of course saw the 2 bots Willy & Markus inflating the price of Bitcoin, it is well worth reading up about this in more detail if you aren't already well versed, but the upshot was an estimate of 200,000 + Bitcoin being traded in this manner. In February MtGox filed for bankruptcy protection and thus collapsed the demand of the small Bitcoin market, this is the kind of factor you need to cause a full capitulation that in this case lead to the infamous 2014 bear market.
The above leads me to conclude that this wave of immediate bearish sentiment is unmerrited and not supported by the present longer term indicators, it stands as a useful study of corrections, however to then expect Bitcoin to continue this path right through the year is to take a far too simplistic view of market behavior.
My parting thought is that something happening once before is clearly not a recurring pattern that can be relied upon, remember this in the coming weeks when the popular TA folks are swapping between bullish and bearish.
I have been keeping up with popular views over the weekend and there seems to be a bit of a throwback trend, funnily the same chart comparison was being shared around Reddit a month or 2 ago, but it's back again and whilst I will admit it has it's merits to compare past corrections, I do have some serious problems with expecting the market to hit Ctrl + C then Ctrl + V.
First things first I feel it's worth mentioning that the trendlines I have drawn above, like last time, is based on the daily price close using Heikin Ashi candles to show a solid price range to artistically indicate a trend. So don't be too religously attached to these lines, I just have a personal preference for viewing something as volatile as Bitcoin in this we way.
Problem 1 - The Pattern itself
My first thoughts when I look at a corrective downtrend such as the one above is how easily we can be drawn into what we see as an identical pattern. This is of course the main similarity for both charts, but is this significant? Both have followed a similar path, but one could just as easily argue we have bounced off support during the downtrend and followed an established % retrace pattern, indeed similar patterns can be seen in other corrections across assets so I wouldn't define this alone as 'spooky'.
Problem 2 - Where are we?
IF we are to believe that history is repeating itself then we need to understand at what point we are presently at. We can see above that after we broke out of the decending triangle on the weekly view that we had short movement up followed by about 3 weeks of consolodation, before a larger uptrend took hold that held us up for about 8 weeks. So if we are indeed taking on the same pattern, we are surely not about to crash down as many are claiming.
It is this far that i'm inclined to agree with, this scenario does match my own prediction that we will see a spring uptrend followed by another correction, indeed all of the indicators on the weekly view is not telling us that this run is over, quite the opposite. But how significant is this really? Expecting the market to behave exactly in a copy and paste manner to the extent of that correction simply because it's gone down and now it's moving up again is problematic to say the least, many things have changed since 2014.
Problem 3 - Variables
This is the elephant in the room with making a side by side comparison
The run up of Bitcoin in late 2017 saw a huge interest in Bitcoin and a fever of speculative purchase, pushing the price to further extremes. Whilst we cannot of course rule out the role of manipulation here as you could argue in any market, the diffrence between the amount of volume this would require in 2017 across multiple exchanges means this alone cannot be completely accredited to the rise.
2014 however of course saw the 2 bots Willy & Markus inflating the price of Bitcoin, it is well worth reading up about this in more detail if you aren't already well versed, but the upshot was an estimate of 200,000 + Bitcoin being traded in this manner. In February MtGox filed for bankruptcy protection and thus collapsed the demand of the small Bitcoin market, this is the kind of factor you need to cause a full capitulation that in this case lead to the infamous 2014 bear market.
The above leads me to conclude that this wave of immediate bearish sentiment is unmerrited and not supported by the present longer term indicators, it stands as a useful study of corrections, however to then expect Bitcoin to continue this path right through the year is to take a far too simplistic view of market behavior.
My parting thought is that something happening once before is clearly not a recurring pattern that can be relied upon, remember this in the coming weeks when the popular TA folks are swapping between bullish and bearish.
Note
I hope this balance of the arguments was of interestI will be posting a view on current price action shortly but I wanted to first share my thoughts on some of the, in my view, faulty chart comparisons doing the rounds at present.
Thanks for reading
Note
Also, a quick update that I am bearish on Mr Probz. He is not in the top 100 at the moment so it seems unlikely that the pattern will repeat, suggesting Mr Probz and Bitcoin performance might not be as closely linked as I first thought
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