Below is an interesting perspective from one of the members of the MiningStore Elite-Traders community. It makes some very interesting parallels between previous revolutionary markets and Bitcoin. Although it is a lengthy read, it is a great perspective on the market and where it is heading. Enjoy.
An Architects Perspective: Prediction for Bitcoin Based on Historical Trends
As a graduate architect running my own business, I have found trading to be a perfect supplement to the business during quiet periods. Building a business is not easy – Coexist Design Study has had many ups and many downs, and I have learnt over several years that trends and movements happen on small scale time frames, and happen on larger, historical time frames.
Architects above all, in my opinion, need to be holistic and overarching thinkers – more than anything we need to understand what, why and how things move and therefore how we can better create something that will perfectly fit to those parameters. Clearly, there’s some parallels to trading, and perhaps the education I received has helped me more easily be able to research and develop ideas on trading and the basic principles and ideas that actually make it all move.
What I’m currently very interested in is trying to predict the movement of the crypto markets, and most importantly the potential for the influx of money this year and whether now is a good time to invest or not. The factors I’m using to determine my prediction are not so clear cut – in other words I can’t easily identify specific times and strategies that encapsulate all these factors, but they are in my mind when I am looking, so they form the foundation of my mindset if you will. The things I am looking for are:
- Historical evidence of price movements
- Rate of information transfer
- mindset of investors and in particular “intelligent investors”
- Volume of money
- Buy low / sell high and greed and FOMO mindset
- basic technical analysis (fibonacci retracement which is a growth pattern in nature)
- Basic prediction for market capitalisation.
Again, this is not an exacting science, but more of an overarching prediction based on the above ideas.
So the first and logical place to look at is gold. A lot of trading, I have found, tends to become a self fullfilling prophecy. So if the markets in crypto are suggesting Bitcoin will become a storer of value, then I simply take this as a given and am confident in comparing it to gold. Gold is an asset, and it’s value is given over by us. On its own, realistically gold is nothing, it’s just a thing, but it’s because we have chosen it to represent a storage of value, it has inevitably become a storer of value.
So first, let’s take an overall look at the history of gold from the late 1960’s to the present. I try to place mysself into the mindset of the 60’s – trading is slow, wealth is building in post war economies, and the rate of information transfer is through newspapers and televisions. There were particular conditions that lead up to the gold bubble crash of January 1980 – what actually happened is not all that important though in my opinion, as what it really represents is money making money for money’s sake. In other words, people saw an opportunity to make a lot of money, and there would have been the early adopters, the people shilling the idea, and the hordes of people following to try and make a quick buck. What ensued was a radically over valued price of gold and an eventual correctional crash – a bubble. The years that followed on from this are characterized by the years of paper trading, with the low point of the market determined by the assets of the intelligent investors. For them, gold is an asset to borrow against – therefore gold will never ever get lower than what it was at that point because there is a certain volume of money now stored forever in gold. Enter the internet!
The internet was a catalyst for the next boom cycle in gold. The rate of information transfer is accelerated through the internet, as well as the overall reach and an expansion in overall wealth and human population were the perfect conditions for a bubble. Zooming in on the charts, I now believe we are in the period highlighted within the above charts in the crypto markets – the early adopter investors stage. This is the period of the early investors, the quickest ones to catch onto the idea and what ensues is money making money for money’s sake.
Naturally, it has a value given to it by us, but essentially the main driving force for this bubble and all bubbles is greed. As the first exponential rush of people enter into the market, the most savvy investors are the market makers and confidentally take a profit and make a killing. Using those profits, they always get it on the bounce back, and this is where time and cycles come into play as well as the self fulfilling nature of technical analysis. Usually the price will come up to it’s previous high before another sell off, then a break out, which generally coincides with news and developments. Please especially note the fibonacci retracements and remember most profoundly that the fibonacci sequence is a pattern of growth throughout the entire universe and what is happening here? It is the same logic of growth that applies here to money!
Just to reiterate this point, I am also showing the same patterns above on ALPHABET shares which owns Google. I have very specifically chosen them as a company which has shown patterns of strong growth since its inception, so the driving force behind all of this is money making money for money’s sake. It shows strikingly similar patterns, which in my opinion, are very revealing of the psychology behind trading. There’s a big sell off at the start of 2008, and in gold’s case a bounce back in 2009 at roughy the same time of the year, whilst for ALPHABET it took 2 years and again the sell off occurred at around the same time. But it starts with early investors, profit taking, buy back and further profit taking, a push through, and wider adoption driven by hype and speculation and profit potentials that accelerates as more and more money and people enter into the idea (doesn’t this sound familiar?). Please once again take note of the fibonacci retracement. It is now my belief that stocks in general are highly overbought and in a bubble ready for a correction, and if this occurs over the next 1-3 years it would certainly give me greater confidence in the ideas being expressed in this article.
Finally, we have Bitcoin, the storer of value in the crypto world. I am not commenting on the value of Bitcoin, or whether or not it will be a lasting cryptocurrency – for the purposes of this article that is irrelevant. For now I take it as a given that Bitcoin is here to stay as a storer of value, with many investors having portions of Bitcoin in their portfolio. Because there is already a huge volume of money in it, it’s really not likely that the price will ever totally crash unless those with the most holdings decide to make it crash – and in the case of the crypto economy and the belief and heart behind it’s creation I find this to be highly unlikely. I believe Bitcoin is in the early adopter stage – in other words in the first bounce point of the fibonacci retracement. Blockchain technology is here to stay, decentralisation is the way of the future, and we are the wave of early investors. I’m the idiot from last year who got swept up in the XRP hype and speculation bubble. XRP, Bloomberg, Mike Novogratz – when seen from an objective point these form part of the 1 big money making machine and the catalyst for money making money for money’s sake.
As more and more money enters into the crypto market, the market cap is likely to exceed the trillions – all it takes is just a little bit of money from all other asset classes to filter into this market for the market capetalization to sky rocket. I think we are at the bottom of the market, and I think the very fact people are saying it is the indication for that. I think by looking at history, it’s very likely that the profit taking patterns have been established in early January (coincidentally very similar to Gold and ALPHABET). I assume that this coincides with the profit taking of the Asian market, and when there’s a clear cycle and a clear pattern, it’s a lot easier to follow and becomes a self fullfilling prophecy based on FOMO and greed. I think Bitcoin is on it’s way back up to the $20k mark before it will suffer another sell off.
There’s already signs of whales making moves and the market is on an uptrend almost across the board. XRP has a huge pumping, Electroneum, Qtum, Cardano to name but a few. I will be doing my research and buying up this week and holding until late December / early January for signs of the profit taking, before I see the suppport line determined by the new influx of money and the subsequent mooning. If we do see this occur this year, and a crash in the ALPHABET, I could very confidentally predict how the prices will move, and if Bitcoin is to stick around, I predict a peak price of $300k before a major correctional crash.
Make no mistake, we are in a bubble and it’s going to last several years – so do you want to play with the big boys and ride the waves of the bubble, or do you want to be a sucker like everyone else and watch from the sidelines? My mindset is simple – everyone from last year who made a shit load of money is going to try to do everything in their power and influence to make sure it happens again this year.
Steven Trpenov – Founder of Coexist Design Studio