Bitcoin Long Term Price Analysis Using Five Years Data – October 2018
September 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 leader 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.
The crypto market is still in early stage and with a lot of fluctuations. It is massively unstable and very speculative.
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.
1. Last month BTC performance – September 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
Bitcoin entered the previous month with value of around 7.000$, recovering from the fall it had in august. In the first couple of days of September, the price continued to climb and reached it month maximum on 5th of September, with a value around 7.400$. After this it started to fall again and found support around 6.200$. Until the end of the month the price mainly remained stable, slowly increasing, trading it the zone of 6.200-6.600$. Bitcoin finished the month with a price around 6.600.
2. 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 01.10.2013 to 30.09.2018.
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 called simple linear regression. If more than one factor is included the process is called multiple 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 = 4,539x + 190.350
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 0,49. Meaning that, the time as variable, have 49% 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. Here we are just on the edge of that value.
3. 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:
y = 4,539*43466x + 190.350 = 7.029
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 advisor.
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 ten years.
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.
4. Trend comparison with the previous month
Comparing this month with the previous month, for which I also made this type of analysis the trend is showing a light increase. The previous month the data showed that for 01.01.2019 a price of 6.942, and in 10 years time 21.862. Now those numbers are 7.029 with 22.332. So, September has lifted the trend for just a bit.
screenshot taken from my excel file
5. Conclusion
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. 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.
At the end once again :)
I do not provide personal investment advice and I am not a qualified licensed investment advisor.
This is a representation of a simple statistical model. Statistics is about trend and averages, not an accurate prediction.
All the best.
@dalz
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Hi, @dalz!
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Well thank you :)