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Difference In Bull Market Targets
Over the past few months, we’ve been talking about a wide variety of different analyses when it comes to timing the Bitcoin Bull Market top.
Here are a few of the most notable analyses covered:
- Four Year Cycle
- The Halving “Mirror Effect”
- The extrapolation of Bitcoin’s historical price performance after each Halving
- Stock to Flow Principles
And I often get asked by readers: “why are the targets different in every analysis?”
In psychology for instance, scientists will try to gain insight into the human condition by investigating the biological, cognitive, and socio-behavioural perspectives.
Each level of analysis brings something valuable to the table and it is often the intersection between perspectives that offer us a more holistic approach and therefore a broader picture of understanding when it comes to a certain topic.
So while different analyses about Bitcoin’s price action will arrive at slightly different conclusions, there is still a lot of confluence across approaches.
In today’s newsletter, we’ll talk about what each perspective offers in terms of insight, how they differ, and what more should we focus on going forward in an effort to better understand where and when Bitcoin could peak in this Bull Market.
Four Year Cycles
The Bitcoin Four Year Cycles suggest that Candle 1 will see the most exponential growth this year.
Accounting for historical upside and downside volatility and a potentially diminishing rate of return in Candle 1 rallies, Bitcoin could rally to as far as $150,000-$170,000 in Candle 1, peaking before the end of 2021 with a Bear Market to follow in 2022.
The Four Year Cycle offers a relatively conservative target for price but is useful in conceptualising how Bitcoin cycles throughout the years.
It helps identify boom and bust periods; periods of maximum financial opportunity and periods of maximum financial risk.
So while it isn’t clear whether Bitcoin will continue to experience a declining rate of return in terms of its Candle 1 rally, the Four Year Cycle perspective is great for understanding roughly when Bitcoin could peak which in of itself is extremely valuable.
After all, whatever the price of Bitcoin is come Quarter 4, the Four Year Cycle perspective suggests that we might be close to a top, with a potential Candle 2 looming large in 2022.
Halving “Mirror Effect”
The Halving “Mirror Effect” pertains to the phenomenon whereby the amount of days where Bitcoin has bottomed before the Halving roughly equals the amount of days where Bitcoin peaks after the Halving.
Let’s look at the key examples to illustrate this phenomenon.
It took roughly the same amount of time for Bitcoin to bottom prior to Halving #1 (i.e. 378 days) as it took for Bitcoin to rally before topping out after its second post-Halving #1 Market Cycle (i.e. 364 days).
This curious role of time prior to and after Halving #1 is also evident in the context of Halving #2.
It took roughly the same amount of time for Bitcoin to bottom prior to Halving #2 (i.e. 546 days) as it took for Bitcoin to rally before topping out after its second post-Halving #1 Market Cycle (i.e. 518 days):
What if this Halving Mirror Effect continues in the context of Halving #3?
Bitcoin bottomed 511 days prior to Halving #3.
Should Bitcoin rally for 511 days after Halving #3, that would mean that Bitcoin would peak in early October 2021.
Interestingly, this Halving Mirror Effect aligns nicely with findings from the Four Year Cycle.
Which only highlights how useful it is to look at differing levels of analysis, as they will help us arrive at a clearer conclusion.
So while there is confluence in terms of when Bitcoin could peak (i.e. both Four Year Cycle and Halving Mirror Effect analyses point to a Q4), is there confluence in price targets?
To some extent - yes.
Let’s recount that Bitcoin rallied in two separates uptrends after Halving #1 (i.e. +1742% and 2200%) and after Halving #2 Bitcoin rallied +4080%.
So if we extrapolate Bitcoin’s post-Halving #1 performance to Bitcoin’s post-Halving #3 performance, Bitcoin could rally anything between +1742% and 2200%.
A +1742% rally after Halving #3 would result in a ~$150,000 Bitcoin.
A +2193% rally after Halving #3 would result in a ~$188,500 Bitcoin.
Very interestingly, there is confluence in the Four Year Cycle price target as well (Four Year Cycle target suggests $150,000-$170,000).
Not only does the Halving Mirror Effect align with the Four Year Cycles in terms of when Bitcoin might peak, but the Four Year Cycle price target shows confluence with Bitcoin’s historical Post-Halving price performance extrapolated.
But only for Bitcoin Post-Halving #1 - which is the only caveat.
And remember - the Four Year Cycle perspective is supposed to figure as a conservative target.
So we see confluence for a theoretically conservative target.
But what if we extrapolated Bitcoin’s post-Halving #2 performance (+4080%) to Bitcoin’s potential post-Halving #3 price appreciation?
A +4080% rally after Halving #3 would result in a ~$342,000 Bitcoin.
So extrapolating Bitcoin’s Post-Halving #2 performance to the performance Bitcoin could potentially see Post-Halving #3 results in an exponential target.
So according to the perspectives covered, we arrive at two different targets:
- Conservative: $150,000-$180,000
- Exponential: ~$342,000
Let’s see how the Stock to Flow Principles align with these targets.
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Stock to Flow Perspective
According to the Stock to Flow model, Bitcoin is set to upside deviate beyond the S2F line in mid-May 2021.
And as per Part 3 in the Stock to Flow series Bitcoin tends to uptrend beyond the Stock to Flow model for 43-63 days before peaking, which would mean that Bitcoin could peak between June 22nd and July 12th 2021, provided that Bitcoin’s current bullish momentum continues.
But that said, this timeline isn’t necessarily set in stone. As discussed in Part 3, there are numerous factors that could slowdown the Bitcoin bull trend into consolidation or even a deep correction, which would postpone the timing of the actual deviation.
As for price targets, Bitcoin tends to upside deviate between +257% to +554%.
A +257% upside deviation from ~$84,000 would lead Bitcoin to a price of ~$300,000.
A +477% upside deviation from ~$84,000 would lead Bitcoin to a price of ~$484,000.
And a +554% upside deviation from ~$84,000 would result in a $550,000 Bitcoin.
So in fact, the Stock to Flow perspective suggests confluence with the more exponential Post-Halving price performance targets of ~$342,000.
In sum:
So according to the perspectives covered, we arrive at two different types of targets, conservative and more exponential:
Conservative:
- Four Year Cycle: $150,000-$170,000 by the end of 2021
- Halving Mirror Effect: Peak in October 2021
- Historical Post-Halving #1 performance extrapolated after Halving 3: $150,000-$188,500
Exponential:
- Historical Post-Halving #1 performance extrapolated after Halving 3: ~$342,000
- Stock to Flow Upside Deviations: Peak In Q2 somewhere between $300,000-$550,000.
Conclusion
As we delve deeper into different types of levels of analysis in address where and when Bitcoin could peak, we may arrive at slightly different conclusions each time.
But it’s very interesting to see how we are seeing a lot of confluence nonetheless across these different perspectives.
That said, going forward in the Rekt Capital newsletter, we’ll need to address a common question I get from readers when it comes to the Stock to Flow deviations:
- Plan B’s original Stock to Flow model has slightly different data points. Will the findings from the Rekt Capital Stock to Flow Series be different when analysing this specific S2F model, rather than the “lookintobitcoin” Stock to Flow model?
- Do the Stock to Flow upside deviations differ in the new S2FX model?
These questions will be addressed in the coming weeks as we continue to find the intersection between different levels of analysis, models, and metrics which may hold the high-probability answer…
Thank you for reading and wishing you a restful Easter Holiday weekend.