The cryptocurrency market has been on an absolute tear lately and is in a clear bubble. But the question really is how high can it go?! I made a video yesterday to answer just that question. For myself and for you of course. Check it our and please tell me what you think after you've seen it.
The bubble is good!
Bitcoin has more than doubled, ethereum went from $12 to $180 and pretty much any other currency or token has multiplied. This year. In fact I am not aware of anything that is not up this year. It is obvious to me that we are in a bubble. Any time all prices of a market shoot up parabolic, you know we are in a bubble.
But a bubble is not a bad thing. It shows that tremendous amount of economic energy is flowing into the market. Maybe a little too fast at this moment, but in general that is a good thing.
The internet was in a bubble in 2000. Today the internet is the backbone our our economy. I believe with the internet and crypto the bubbles are simply showing the potential. Nonetheless we have to understand that bubbles will pop and if we are invested in the market we have to be prepared for it. By it I mean a 50% to 80% crash.
It's early and tangible evaluations are impossible
This market as a whole is still a baby. We cannot even begin to predict its potential. There are very few solutions that are production ready and out on the market. How do you evaluate bitcoin? Well you think about what could happen if it becomes a major global currency or what it could be like toward the end of its lifecycle. Pretty much any other crypto tech is so new and revolutionary that the endgame is really hard to envision as well.
As a result valuations fluctuate and are very emotional on the one hand, while professional traders are riding these up and down waves and encourage the bubbles.
While this may seem very wild, I think these are normal growing pains for a new rapidly growing technology that may change the very structure of how human societies will work.
Where are we in the bubble
If we look at the market with a short term view, it looks like this rocket is about to explode.
Any time the market goes up in a straight line, it is cause for concern as this type of trend can never hold for very long.
But because this market is growing exponentially it is much better to look at it in a log chart.
Looking at the log chart we can see that bitcoin has been growing very steadily since the summer of 2015, for two years now and just recently broken out of this trend. Every bubble has this straight up or parabolic chart that we can see in previous bubbles. In this years bubble even though we have had huge gains this is not visible in the bitcoin chart, but now we have just recently (last week) broken out of steady trend. This to me means now the parabolic price explosion may only just be starting. That said the higher we go in bubbles the smaller the upticks have become recently so according to this we may be close to the top already! It's never easy and simple. Please keep that in mind.
However bitcoin has a key advantage: it has not exploded relative to other cryptocurrencies. The log chart shows this clearly. Also currently volumes are at absolute high. Even for alts. Check out the volumes for the alt market in the screenshot above, it looks like the volumes were non existent a few months ago. This is only because they are so ridiculously high at the moment. $2B of bitcoins were traded the other day. That's insane growth from a few hundred millions usually per day last year. I don't think that the bubble will pop when the volume on green candles are at a maximum.
Extrapolations from previous bubbles
I put together a spreadsheet that contains data from all the bitcoin bubbles. We are now in the 6th bubble. Then I calculated some metrics, such as in each bubble what was the high to low and high to high price movement. From that I calculated the possible outcomes given min, max and averages. I also looked at what would happen if this bubble only went 1/2 as well as the previous one, since the trend seems to be going downwards in that regard.
The range is wide
From the spreadsheet alone we get a range of possibilities that is very wide. From $3k to $30K. The lower targets are much more realistic because of reduced volatility, however it seems rather likely that bitcoin will rise further than where we are today. While the crash may happen tomorrow a few more double ups are also possible.
I hope this was all helpful info. Please let me know what you think and give me some feedback so I can become a better writer and video creator in the future. Thank you for all your valuable up-votes and shares or re-steems.
Be careful out there. And may the profits be with you all!