Table of Contents
- Part 3
- 1. First Stock to Flow Upside Deviation
- Bitcoin Bull Market Peak (June 2011)
- 2. Second Stock to Flow Upside Deviation (April, 2013)
- 3. Third Stock to Flow Upside Deviation
- Bitcoin Bull Market Peak (December 2013)
- 4. Fourth Stock to Flow Upside Deviation
- Bitcoin Bull Market Peak (December 2017)
- 6. Sixth Stock to Flow Upside Deviation
- Bitcoin Bull Market Peak (TBD)
- When Does Bitcoin Typically Peak?
- Where Could Bitcoin Peak?
Do not index
Part 3
In today’s newsletter, we will be focusing solely on the sixth upside deviation in Bitcoin’s price beyond the Stock to Flow line.
This will be done in order to address the following key questions:
- At which price point could Bitcoin peak in this cycle?
- When could Bitcoin peak in this cycle?
To answer these questions however, we will need to cross-compare past upside deviations with one another in an effort to spot any recurring tendencies among them.
1. First Stock to Flow Upside Deviation
Bitcoin Bull Market Peak (June 2011)
Bitcoin’s first upside deviation resulted in the most explosive gains beyond the Stock to Flow line, amounting to +1157%.
Bitcoin broke beyond the Stock to Flow line on April 27th (2011):
And peaked in its upside deviation at ~$28 around six weeks later (43 days) on June 9th (2011):
It then took Bitcoin 120 days to fall below the Stock to Flow line:
Overall, the entire deviation beyond the S2F line - including the uptrend and then the downtrend - took 163 days (around 23 weeks).
And in early 2012, the Stock to Flow line actually figured as resistance, rejecting Bitcoin’s price.
In sum:
- Bitcoin upside deviated +1157%.
- It took Bitcoin 43 days to peak after deviating beyond the S2F line.
- Then it took Bitcoin 120 days to retrace towards the S2F line.
- In total, the upside deviation including the uptrend and the downtrend lasted 163 days (around 23 weeks).
- Only 26% of the entire upside deviation was when Bitcoin was uptrending. Most of the upside deviation time was spent in a downtrend.
2. Second Stock to Flow Upside Deviation (April, 2013)
Bitcoin’s second upside deviation resulted in a +477% rally in Bitcoin’s price.
On the 28th of February 2013, Bitcoin’s price was at $32.25 when it broke past the Stock to Flow line:
After breaking the Stock to Flow line, it took Bitcoin’s price 45 days to rally +477% to a peak of $230.68 on the 9th of April 2013:
It then took Bitcoin 88 days to retrace from the peak to the Stock to Flow line which figured as a key support at the price point of $66.34 on July 6th (2013):
In other words, the Stock to Flow line marked the Bear Market bottom after a Bitcoin retrace of -80%.
After the rebound from the Stock to Flow line, Bitcoin’s price continued to climb along with an increasing Stock to Flow line until Bitcoin rebounded from the Stock to Flow line yet again in early October 2013:
What’s important to note here is that Bitcoin was simply trend-following the Stock to Flow line and not deviating from it.
However, after testing the Stock to Flow line as support in early October, the actual upside deviation began to develop in mid-October:
Which leads us to Bitcoin’s third upside deviation. But before we dive into the third deviation, here’s a summary of the second one:
In sum:
- Bitcoin upside deviated +477%.
- It took Bitcoin 45 days to peak after deviating beyond the S2F line.
- Then it took Bitcoin 88 days to retrace towards the S2F line.
- In total, the upside deviation including the uptrend and the downtrend lasted 133 days (around 19 weeks).
- Only 33% of the entire upside deviation was when Bitcoin was uptrending. Most of the upside deviation time was spent in a downtrend.
3. Third Stock to Flow Upside Deviation
Bitcoin Bull Market Peak (December 2013)
It took Bitcoin 51 days to rally +554% to a new All Time High of $1134.93:
And then it took Bitcoin 401 days (57 weeks) to retrace until the Stock to Flow line before breaking down from it, failing to hold as macro support. The Bear Market continued from that point:
But what’s important to note about this upside deviation is that Bitcoin’s price peaked after the Stock to Flow line stopped climbing. The Stock to Flow line actually began to level out:
In fact, the Stock to Flow line levelled out on the 27th of November (2013) whereas Bitcoin’s price peaked only a week later on December 4th:
Compared to previous upside deviations, this one was the first one where Bitcoin peaked when the Stock to Flow line had levelled out.
In sum:
- Bitcoin upside deviated +554%.
- Bitcoin upside deviated from the Stock to Flow line when the S2F line was climbing but Bitcoin’s price actually peaked when the S2F line was flat.
- It took Bitcoin 51 days to peak after deviating beyond the S2F line.
- Then it took Bitcoin 401 days to retrace towards the S2F line.
- In total, the upside deviation lasted 452 days (around 64 weeks).
- Only 11% of the entire upside deviation was when Bitcoin was uptrending. Most of the upside deviation time was spent in a downtrend.
4. Fourth Stock to Flow Upside Deviation
Bitcoin Bull Market Peak (December 2017)
Bitcoin broke past the Stock to Flow line on October 14th (2017):
And it took Bitcoin 63 days (i.e. 9 weeks) to rally +257% to a new All Time High of ~$20,000:
Then it took Bitcoin 192 days (i.e. 27 weeks) to retrace towards the Stock to Flow line:
Bitcoin found support at the Stock to Flow line for several months before breaking down from it in mid-November (2017) to continue the Bear Market downtrend.
But perhaps the most important insight here is that Bitcoin deviated beyond a flat Stock to Flow line and peaked when the Stock to Flow line was flat.
The Stock to Flow line began to flatten out on July 9th (2017):
But Bitcoin’s price upside deviated beyond the now flat Stock to Flow line on October 13th (2017):
Therefore it took Bitcoin around three months to deviate beyond a flat Stock to Flow line.
But that being said, Bitcoin wasn’t following the Stock to Flow line perfectly in the lead up to this deviation.
In fact, Bitcoin was below the Stock to Flow line for a considerable time.
But once Bitcoin deviated to the upside, it took Bitcoin two months to peak:
In sum:
- Bitcoin upside deviated +257%.
- Bitcoin upside deviated from the Stock to Flow line when the S2F line was flat and Bitcoin’s price peaked when the S2F line was flat as well.
- It took Bitcoin 63 days to peak after deviating beyond the S2F line.
- Then it took Bitcoin 192 days to retrace towards the S2F line.
- In total, the upside deviation, including both the uptrend and the downtrend beyond the Stock to Flow line lasted 255 days (around 36 weeks).
- Only 23% of the entire upside deviation was when Bitcoin was uptrending. Most of the upside deviation time was spent in a downtrend.
Let’s now sum up all the findings from this Stock To Flow analysis in order to arrive at at a sensible expectation of where Bitcoin may peak in this cycle.
(Bitcoin’s fifth upside deviation will be ignored for the purpose of this analysis as it figured as an outlier, as discussed in Part 2).
6. Sixth Stock to Flow Upside Deviation
Bitcoin Bull Market Peak (TBD)
Before we discuss the sixth upside deviation, let’s summarise all the findings in a table:
This table makes the entire macro perspective much clearer, distilling key recurring tendencies in historical upside deviations beyond the Stock to Flow line.
A key takeaway is that Bitcoin tends to uptrend beyond the Stock to Flow model for 43-63 days before peaking.
On the other hand, the downtrend that follows after the peak ranges from 88-401 days, though most downtrends in these upside deviations conclude inside 200 days.
Interestingly, the uptrend proportion in the upside deviation represents 11-33% of the entire upside deviation; the downtrend in the upside deviation representing most of the actual deviation.
The reason that these uptrend proportions are important is because once Bitcoin peaks in this cycle, we could reasonably expect Bitcoin’s price to revisit the Stock to Flow line within 200 days (401 days being the clear outlier in this case).
And once Bitcoin reaches this Stock to Flow line, it is very likely the S2F line will fail as support, effectively unleashing the final phase of the Bear Market where Bitcoin will find a bottom in the several weeks that follow said S2F support breakdown.
When Does Bitcoin Typically Peak?
Across the years, Bitcoin Bull Markets tend to end in June and December, with one Bull Market also ending in April.
So according to Stock to Flow trends, when could Bitcoin peak?
On May 10th (2021), the Stock to Flow line is set to stop climbing and begin to flatten out at the price point of ~$84,000:
Therefore if Bitcoin’s price action continues to perfectly follow the Stock to Flow line as it has been for the past several months, that will mean that Bitcoin will begin to upside deviate beyond the Stock to Flow line at around the time that the S2F line flattens.
So if Bitcoin’s bullish momentum doesn’t slow until May, then Bitcoin will likely begin its upside deviation in ~mid-May, effectively eclipsing the ~$84,000 price level.
Historically, Bitcoin tends to produce an uptrend that lasts between 43-63 days before Bitcoin finally peaks beyond the Stock to Flow line.
This would mean Bitcoin could peak between June 22nd and July 12th 2021, provided that Bitcoin’s current bullish momentum continues.
However, if Bitcoin’s current bullish momentum does slow down (for example, Bitcoin would retrace or form an extended consolidation period), this could result in Bitcoin decoupling from the currently ascending Stock to Flow line, in which case Bitcoin’s price would find itself temporarily below the Stock to Flow line.
Over the coming weeks, we will investigate the various factors that could affect Bitcoin’s so far perfect trend-following relationship with the Stock to Flow line; as well as assess the probability of these factors actually occurring.
That said, let’s look at where Bitcoin’s price could peak in this Bull Market should Bitcoin indeed upside deviate beyond the flat Stock to Flow line in mid-May, eclipsing the suggested ~$84,000 price point:
Where Could Bitcoin Peak?
Bitcoin price deviations beyond the Stock to Flow line range from +70% to +1157%, with other deviations being +477%, +554%, and +257%.
Across this data set, one could argue that +70% and +1157% are outliers and therefore could be classified as less likely to recur (a +1157% would result in a Bitcoin that is worth just over a million dollars).
Even so, +70% upside deviation beyond ~$84,000 would result in Bitcoin reaching ~$143,000.
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.
In future newsletters, we will be discussing how these Stock to Flow-based findings coincide with other levels of analysis as well as which type of upside deviation is more likely to repeat in the future.