Bitcoin Long Term Price Analysis Using Five Years Data – November 2018

October is behind us, and it is time for some monthly analysis. One of them, which I do, is the analysis of Bitcoin price. Bitcoin is the beacon of the crypto world and trendsetter. Almost all the other coins follow Bitcoin. Including STEEM. Also, it has been around longer then any other coin, and there is a relevant period to analyze.

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From a perspective of crypto prices, October has been one of the most stable months in the crypto space. What does this this means when we look at the big picture? A month with a stable price can actually change the picture and the long term trends.

There is a lot of analysis on the price on bitcoin and every other crypto, focusing on day to day price. But let’s look at the bigger picture here. I’m doing this long-term price analysis, so I can manage expectations and not get distracted by these everyday speculations.

Speculating on the crypto market has become a profitable business for some people. This post is not about that. I don’t believe in short term analysis and get rich quick schemes. Even if some people achieve to get rich in a quick way, at the end they will lose it fast as well. Easy comes, easy goes.

Here I’m doing a long term price analysis, so I can manage expectations and not get distracted by these everyday speculations.

Last month BTC performance – October 2018

First let see how the last month went. Here is the graph of the Bitcoin price in august 2018.

_{screenshot taken from my excel file}

Look at that graph. I don’t think there has been a month in bitcoin history whit this kind of graph. It is almost straight line. No volatility at all.

Bitcoin entered the previous month with value of around 6600$. In the first couple of days of October, there was almost no movement. Then around 10th of October the price failed to a 6200. After a couple of days, it climbs back again to 6500. This was the biggest movement in the month. After this it was almost not moving and stable. Just a slight decrease to around 6300-6400 level.

The Results

Well if you don’t want to go trough all the method explained below, and just want to know the numbers, here it is.

_{screenshot taken from my excel file}

The average price on 01.01.2019 is 7094, and the year finishes with an average of 8683.

Pessimistic, optimistic and average scenario are shown on the chart. The probability for this happening according to statistics is 50%. As we can see there is quite a big range there, from 3k to 13k. This is because of the crypto volatile past.

Just to make it clear.

I do not provide personal investment advice and I am not a qualified licensed investment adviser.

This is simple statistics.
Now if you want to know how this numbers are actually generated here comes the method.

The Method

Collecting long term data and determining the trend

For the purpose of this analysis I use the available data on Bitcoin price for the last five years. Here the analyzed period is starting from 01.11.2013 to 31.10.2018.
The source data for this is coinmarketcap.com

The data is imported to excel, formatted and a chart is formed from it.

_{screenshot taken from my excel file}

The chart above is a function of the price of bitcoin in time. When showing the relationship between one item in correlation with one other factor, this is a simple linear regression.

The trend line has a small steep, meaning that the price from now one will increase slowly.
The trend equation, from which the forecast will be done is:

y = 4,7587x + 199.748

where:
y – price of bitcoin
x – the date for which the price is calculated

In this format, the date is presented like a numeric value.

One of the values that represent the accuracy of the model is R-Squared (Coefficient of determination).
R squared", is the proportion of the variance in the dependent variable that is predictable from the independent variable(s).

In the model above the R Squared value is 0,502. Meaning that, the time as variable, have 50% impact of the final output, the Bitcoin price in our case. This is not a bad value, and overall everything above 50% is good enough.
In the last months the R Squared value has increased from 0,47 to 0,5. Meaning that BTC is becoming more stable and predictable. For now 😊.

Forecasting future price of Bitcoin

Having extracted the formula from the chart, we can now input a day in the future and predict the price of bitcoin. For example, for 01.01.2019:

BTC = 4,7587*43466 + 199748 = 7029

The price of Bitcoin on 01.01.2019 using this method will be 7029.

I hope this goes without saying but just to be clear.
I do not provide personal investment advice and I am not a qualified licensed investment adviser.

It is representation of a very simple statistical method to predict the price. This can be totally inaccurate, and the price can be very different from what it’s shows here. Events can occur that can change the price quite a lot.
In fact, if you look at the past period, the trendline is very different from the actual price.

Having said this lets now play with the formula and make some wild predictions for the next year.

_{screenshot taken from my excel file}

From the chart above it can be concluded that the price of bitcoin should increase in time, but slowly. Not the insane bull run with bitcoin worth of one million.

But this is just statistics. It shows averages and trends, not exact numbers. The R value is around 50% so even in this statistics method there is calculated error of 50%. The exact price is simply impossible to predict. Milionis of factors can appear, and millions of scenarios are possible.

Trend comparison with the previous month

Now lets put the previous month, for which I also made this type of analysis, and compare the results.

_{screenshot taken from my excel file}

When comparing this month with the previous month, the trend is showing a very slight increase. The previous month the data showed that for 01.01.2019 a price of 7029, and in the end of the year 8584. Now this numbers are 7096 with 8683. So, October has lifted the trend for just a bit. Even do it was actually down just a bit. But in the big picture this numbers are good for Bitcoin.

Conclusion and some thoughts of the results

As we can see this statistical model shows a slow increase in Bitcoin value. Not a crazy bull run. But, yet again with crypto you can never tell. The numbers in this analysis are averages. Most likely the actual numbers will not be like this.

On the other side, Bitcoin has been around for quite some time now, and there is enough data for a relevant analysis. So, it can be telling us something. Time will be the final judge of this. Will be interesting in one year time to come back to this analysis and see how they performed.

Slow and steady is the best way forward.

All the best.
@dalz

Previous posts on this topic:

• STEEM Price Long Term Analysis Using More Than Two Years Data – October 2018
• Bitcoin Long Term Price Analysis Using Five Years Data – October 2018
• STEEM Long Term Price Analysis Using More Than Two Years Data – monthly update
• Bitcoin long term price analysis September 2018
• Steem long term price analysis August 2018
• Bitcoin long term price analysis August 2018