BITCOIN – HOW HIGH IS UP?

With bitcoin consolidating around the 2021 peak for over 3 months now, I think soon (within 1-2 months) will be a time for it to shine again. One question that both traders and hodlers might have on their minds is: how high could it go once it clears the resistance of 69-73 kUSD.

I decided to look at this issue from several analytical angles:
– BTC peak-to-peak increases in the previous cycles,
– peak-to-peak increases for gold and silver in the great 2001-2012 bull,
– survey of X/Twitter users.

We’ve had four cycles in the BTC so far, with peaks in 2011, 2014, 2017 and 2021. The peaks were: $29.6, $1132, $19,500 and $67,570. The peak-to-peak increases were 38.2x, 17.2x and 3.5x. Now, trying to extrapolate from just 4 data points is a bit of a statistical madness, but we have to live with what we have. I don’t think I can draw much conclusions from the limited dataset other than it is unlikely we will see a peak in this cycle that is 3.5 times or higher than the previous cycle’s peak. So, I don’t think there are good chances that we’ll go higher than ~235 kUSD before a bear market sets in.

Now, let’s look at gold and silver. Both precious metals experienced a major bull market between 2001 and 2011-12. There we major peaks in 2004, 2008 while the final peak was in 2011 for silver and 2012 for gold. So, the 3-4 year intervals are pretty similar to what we’ve seen for bitcoin in the past. We have four peak-to-peak data points: 2008 over 2004 and 2011-12 over 2008 – for each of the metals. The increases were: 2.34x and 1.89x for gold while for silver they’ve been a bit higher, in line with the higher volatility of the white metal: 2.53x and 2.34x. From these examples, I figure that the likely increase of bitcoin should be stronger than gold’s or higher than about 2x. So, I think we could get to 135k BTC/USD at the peak of the cycle.

So, with that information, my basic expectation (that I held for about a year now) is that the likely peak of the cycle will be about 2-2.5x the previous peak, or about 135-170 kUSD. The central forecast would be 152k BTC/USD.

Lastly, I have noticed that the bitcoin investor and proponent Dan Held asked exactly the same question on Twitter to his 700 thousand followers. I decided to look through the replies and make a summary of the responses. At the time of data collection there was a good sample of 159 responses. Some people gave point estimates (e.g. 155 kUSD), some gave the range (e.g. 140-200 kUSD). I took the middle of the range as the datapoint for a given respondent.

Several people remarked that the cycle peak is behind us, but the vast majority proposed numbers higher than 73k. The responses ranged from 75k to 1.5 million BTC/USD, a rather large dispersion. The average was 246 kUSD, while the median was 180 kUSD.

Number of respondents in a given bucket. The number on the axis signifies the low end of the range.

Cutting 10% most extreme responses at both tails of the distribution took the average down to 203 kUSD.

Number of respondents in a given bucket. The number on the axis signifies the low end of the range.

The responses are somewhat higher than my estimates above, but not dramatically so. I’d say my range of 135-170 kUSD contains 50% of my perceived probability distribution (interquartile range), with 25% chances the peak will be lower than 135 kUSD and 25% chances it will exceed 170 kUSD. The interquartile range for the Dan Held’s poll was 130-283 kUSD. So, the lower 25% threshold was almost identical to mine, but the higher end is much higher, likely skewed by the most optimistic bitcoin investors.

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