Will Bitcoin bubble again?
Ok, allow me to state my position before I start: I believe in blockchain technologies as fundamental building blocks of our technological future, but I don’t believe in Bitcoin as an asset. Not yet.
Actually, I have been avoiding to write about Bitcoin markets in the past. I think is kind of lame. Why? Because right now the market is still driven by pure speculation and there’s no arbitrage at all. In this kind of context is impossible to infer what’s coming on… However, from the scientific point of view, the speculation phenomenon by itself is still interesting. So, here we go.
I like to bet. I love the game, and that’s why I bought a couple of thousands in Bitcoins last year (and sold on time, fortunately), hehe.
I’m really grateful that I managed to create a good indicator for predicting the bubble burst in December 2017. But that was quite evident. No speculation involved, just a lot of FOMO and panic at the same time. Easy to predict.
The real deal is to predict the hype soon enough. To decipher the intentions behind an individual or an organization that tries to manipulate the markets. Like right now. A week ago or so, a supposedly anonymous user (people argue it may be an automated trading bot) bought around $100M (20,000 BTC) in Bitcoin on different markets. Bitcoin price jumped almost 20%. Making it cross the $5K line. Everybody is getting crazy all around and saying this was a resistance, and of course (they make a living of this) this is gonna shot up the price ’til the $20K again… 😑
So that made me dust off my previous algorithms for computing resistances and supports, and try to find out what they were saying about this “supposed” price resistance. The algorithm works taking past price behavior as ground truth and reconstructing the topological structure at different geometrical scales. It belongs to the family of the fractal analysis methods. In the figure, I’m ignoring the resistances above $12.5K and below $2.5K.
PUM. Seems that actually, the price went through two resistances, first at $4,394 and a second at $4,703. The next closest upper resistance is at $5,627. It seems kind of extreme behavior to me since there have been months of tranquility. Markets don’t react so abrupt to absolutely anything. I was afraid my algorithm was biased somehow, so I tunned a parameter it uses for the granularity (scale) in the inferential method. It gave wider lines but interesting enough, the resistance at $5,627 stayed in exactly the same place.
For me, this is a deep and disturbing signal. If that’s caused by some psychological feature I’m not aware of in the mind of Bitcoin traders, I don’t know. Maybe there are a lot of orders in different markets situated at $5,500, which will pull the price by inertia a little bit farther, to around $5,627. Also, the difference is around 0.02% which is a very popular amount for commissions in cryptocurrencies markets. Maybe an equivalent and hid pricing law in the markets might explain it.
Don’t know, just speculating right now. But the thing is: if my algorithm is OK (big IF but, why not? ^^’), this resistance seems to be a critical point. I’m eager to say that, if resistance at $5,627 is surpassed by the BTC public price, it will rise until $7K (next resistance).
Perhaps that wealthy $10M owner bot out there has the same hunch?
To my enormously dubious friends: I promise not to erase this post, even if my predictions are wrong :P
EDIT (May 4th, 2019): BTCUSD has now surpassed the $5.6K threshold. Here we go…
EDIT (May 9th, 2019): Now crossing a historical resistance:
EDIT (May 11th, 2019): Finally the $7K threshold has been crossed. Looking forward to seeing how far this bull will run.
Disclaimer: By any means, in this post, I’m recommending or assessing any kind of trading activity in cryptocurrencies markets. If you really want a piece of advice take this one: do not invest (NEVER) more than what you are prepared to lose.
