Bitcoin Macro Price Projections (Cont.)

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For the past three market cycles, whenever the 111DMA has moved up and crossed over the 2(350DMA), it has nearly perfectly coincided with the peak of the Bitcoin price. This did not occur on this local high, which is a good indication a bull market is still to come.

This is further evidenced by the fairly complex indicator ‘Reserve Risk’. Reserve Risk is calculated by looking at Bitcoin Days Destroyed (Quantity of Bitcoin * Number of days since coins were moved). This gives greater weight to holders of bitcoin, because there is evidence that holders have greater knowledge of the markets, and sell/buy at better times. 

To calculate:  

BitcoinDaysDestroyed/Circulating Supply of Bitcoin = Adjusted Bitcoin Days Destroyed (Adjusted BDD)  

Sum(Daily Bitcoin Price * Adjusted BDD) = Value of Coin Days Destroyed (VOCD)  

To adjust all the noise of that calculation, a 30 Day median is charted instead, called Median VOCD (MVOCD)

Each day MVOCD (blue line) is below Bitcoin price (black line), more Bitcoin days are being created than being destroyed, ie people are holding onto their Bitcoin because as a store of value they believe its price in the future will be more than it is today. They have given up the opportunity to sell Bitcoin today to instead hold it for the future — so we call this the opportunity cost.  

By summing the aggregate US dollar amount of this opportunity cost over time we create what is termed HODL Bank (yellow line). This metric indicates confidence in the future of Bitcoin built over time. By dividing Bitcoin price by HODL Bank, we can see the risk-reward. This is called the Reserve Risk, and it is charted as the red line. Historically, buying when the Reserve Risk was low, and selling when high, has generated large returns.  

Currently, Reserve Risk is back into the green belt, supporting the theory that now is a great time to once again buy before the next bull run.

This is a projection of Bitcoin’s prices based on a logarithmic regression. As you can see from the above, we have currently bottomed out. We have never broken out of the bottom of this rainbow table before. I believe this chart also supports the ‘overexcitement’ theory discussed with the CVDD indicator. If the market hadn’t hyped and then broken back down, I believe it would have slowly followed the curve of this logarithmic regression, like it did the bottom of last cycle (indicated by the two curves marking the chart).

Let’s now look ahead, to see what the top of the bull market may be:

Average cap (the forever moving average of Market Cap) multiplied by 35 has historically matched the market tops. It is currently approaching $70,000. Note, that this is currently at the end of the bear market. If you look in the past, this line increases greatly with the bull markets. $70,000 is therefore likely a minimum.

If we look at the 5(350DMA), it also has historically called the market tops. This is approaching $40,000. Like above, this value is likely a minimum, as the 5(350DMA) line will increase with the bull market as well.

For me, Stock-to-Flow is one of the most interesting models in depicting Bitcoin’s value. Stock is the size of the existing stockpiles/reserves. Flow is the yearly production.  

Scarcity=SF=Stock/Flow  

Note, 1/(Supply Growth %) = SF. ie, SF is the inverse of Supply Growth Rate.  

Here are some real-world SF numbers:

Gold has the highest SF at 62; therefore, it takes 62 years of production to get current gold stock. Silver is second with SF at 22. This high SF makes them monetary goods.  

Palladium, platinum, and all other commodities have SF barely higher than 1. Existing stock is usually equal or lower than yearly production, making production a very important factor. It is nearly impossible for commodities to get a higher SF, because as soon as somebody hoards them, this causes prices to rise, which in turn causes production to rise. It is nearly impossible to escape this trap. With Bitcoin, supply is fixed. It also has many properties never before seen, making it a better money. (But that is for another report). And that is why Bitcoin currently has a SF of 25.3, second only to gold!  

The hypothesis behind all of this, is that scarcity, as measured by SF, directly drives value. And when charted by market cap, this seems to be very accurate:

We can also model bitcoin’s price directly with SF:

In May of 2021 (about one year after the halving) the 1 day SF model and 365 day SF model converge on the price of ~$95,000. At this point, Bitcoin will have a SF of nearly that of Gold (56 vs 62). 3 years later, on the next halving, Bitcoin will greatly surpass gold, and become the hardest form of money this world has ever seen (SF of 120!).  

In Conclusion:  

I believe that most evidence points to the end of the bear market, and the beginning of the bull market. I believe we are most likely in the reaccumulation phase currently. There is a slight chance we could see one more dip before a bull run seriously starts, but it would be small in magnitude and quick in time.  

For the long run, I feel very safe conservatively predicting $50,000/bitcoin by mid-2021.  

@RobertSpigler 

Great thanks goes to (in no particular order): 

@digitalikNet 

@PositiveCrypto 

@BitcoinEcon 

@PNFtarget 

@renato_shira 

@kenoshaking 

@woonomic 

@MustStopMurad 

@PhilJBonello 

@hansthered 

@100trillionUSD 

@icoexplorer 

@coinmetrics 

@nic__carter 

@khannib 

Awe_andWonder 

@_Checkmatey_ 

trolololo