Bitcoin Macro Price Projections
A report summarizing the clearest evidence surrounding the macro trends of bitcoin’s upcoming price movements.
Robert Spigler
Bitcoin Macro Price Projections
I first published this article on January 9th, 2020 (while Bitcoin was under $8,000), with the conclusion that "I feel very safe conservatively predicting $50,000/bitcoin by mid-2021". While this was ridiculed at the time, mid-February of 2021, the market proved me correct a few months early.
This report summarizes the clearest evidence surrounding the macro trends of bitcoin’s upcoming price movements.
Note: I am a tech guy first and foremost; I have no training in TA. I am using data and ideas from people much smarter than me. They are collectively cited at the end of the report.
350DMA:
Once price moves above the 350 day moving average, historically a new bull run has begun. However, usually the price doesn’t drop below the MA until after the bull run. This market cycle, the price has returned to touch the MA. This should just be a level of support until the real bull market starts.
SMA 1458D: The reason 4 years is chosen for this simple moving average is because a bitcoin cycle is 4 years for every halving. This analysis is similar to the one above (350DMA) in that the SMA1458D line has historically been a line of support for market bottoms. Like above, this cycle, we seem to be returning to it. It has yet to be seen whether we will fully return to the line of support or not.
CVDD (Cumulative Value Days Destroyed) has historically picked the bottom of the market. When coins pass from old investors to new investors, the transaction carries a USD value and also destroys an amount of ‘HODL’ time by the previous holder (the length of time since the bitcoin has last moved). CVDD is the cumulative sum of this value-time destruction as a ratio to the age of the market and divided by 6 million as a calibration factor.
CVDD analysis is similar to SMA 1458D in that we have already touched the support line in the beginning of 2019, yet are again approaching the line at $5,000. The question is, has the bull market started yet, or will we touch this support line one more time? As it can be seen above, last market cycle, it took one year (2014–2015) for the bubble to pop, from 2015–2016 for accumulation to occur (where CVDD remained a line of support), and then 2016 onwards for the bull market to occur. If this cycle continues the same trend, 2018–2019 pops the bubble (already has occurred), and 2019–2020 is the accumulation phase. This would explain the recent near return to CVDD — the market got overexcited yet is now returning to its true value. Comparing the arrows, I don’t think we will make a full return to the line of support.
Delta Cap:
The Realized Cap (The value of all coins in circulation at the price they last moved; in other words, an approximation of what the entire market paid for their coins.) minus Average Cap (This is the ‘forever’ moving average of Market Cap; the cumulative sum of daily Market Cap values divided by the age of the market in days.).
Market Cap has historically touched Delta Cap at market bottoms. This is a similar analysis to CVDD above. While I cannot point to what has caused the sharp increase recently to ~$6k, it supports the same conclusion. Below you can see Delta Cap zoomed in at the end of 2019.
As you can see, Delta is now approaching $6,000.
VWAP:
Volume weighted average price (ratio). The Global VWAP helps find accumulation tops before the run-up, and the ratio tracks bull/bear markets depending on whether the ratio is above/below 1 (respectively). As you can see by the arrows, we are currently in an accumulation top.
I chose the 200 day average for the ratio, because you need something responsive enough to give a useful indicator. Because of this, and due to the price decrease since June 2019, the VWAPR has gone <1 recently for the 200DA. However, when viewing on the global indicator (seen on the below chart), the ratio hits the support line. I therefore do not think this is an indication of a recent bear market. The 200 day average is more often used for medium-view trades. This means that while we have entered (and still remain) in a macro bull market, we are recently in a mid-term down trend.
Here, the only change is the VWAP ratio, where I display the global value instead of the 200 day average. At the end of the chart, you can see that we have entered into a macro bull market (>1 value).
Puell Multiple:
This metric looks at the Daily Coin Issuance (Adjusted by yearly moving average). Historically, this predicts incredibly well the lows and highs of the last two major cycles. (Here, we are just looking at the lows, please disregard the rest of the data on the chart).
Historically, market lows have corresponded with a Puell Multiple below 0.4. You can see that the recent market low of ~$3,200 mid-December of 2018 is indeed indicated as the bottom of the market cycle, with a Puell Multiple of <0.4. This is further evidence that now is a good time to invest, and that 2020 should be a good year for investment.
Extending this chart out to the current date, you can see that the Puell Multiple has risen and now fallen to around 1:
This too happened around mid-July 2016, without affecting the bull run. While this occurred on a halving (which you can see from the steep drop in Puell value), I believe the discrepancy here (occurring ~4 months before the halving) is that the market is pricing this in. This would also explain the premature increase in price, and the fall back to the support lines explained above. This leads to a theory called re-accumulation, which I will explain next.
BEAM:
Is a simple indicator based on price data alone (roughly speaking, it is the ‘price of bitcoin at any given moment divided by a moving average of past prices’). A green buy zone occurs once a BEAM value reaches 0.07 and lower and indicates a good time to buy. A gray hold zone indicates when one should remain from buying or selling, regardless of BEAM value — this occurs for 8 months before and after each halving. A red sell zone occurs when a BEAM value is of 0.96 and higher, and indicates when there is a good selling opportunity. The grey hodl zone is very important, because without it (for example, in April 2013), one would have sold after the price dip that triggered high BEAM values, and misrepresented consolidation for a bubble pop (and missed out on half of the bull market, and huge gains).
As you can see at the end of the chart above, we have now entered a new hodl zone, with the third halving upcoming in May 2020. Because the price (and BEAM Value) has been dropping while within the grey zone, but not below 0.07, this is great evidence of re-accumulation. There were re-accumulation phases at each start of the hodl zones in the past when price dropped again after a peak. The green buy zones are initial accumulation phases. Reaccumulation usually provides a second chance for late comers to buy at somewhat higher prices. This is good evidence that we are beginning to enter a bull market.
Here is a chart of BEAM Values extended to today’s date (although only beginning from Jan 2013, without price or grey zone overlaid). This too supports the reaccumulation theory, as we are once again so near BEAM Values of 0.07.
RVT: Realized Value to Transaction Volume ratio.
RVT Ratios are basically a Price to Earnings Ratio (PE Ratio) for Bitcoin, as it compares the value flowing through the network to the relevant valuation. An RVT of 10 would mean every 10 days, Bitcoin transacts its entire realized cap in value. That is why high ratios are a bearish indicator (Demonstrates decreasing relative demand due to overvaluation and/or low/decreasing transaction volume). Low ratios are a bullish indicator (Demonstrates increasing relative demand due to undervaluation and/or high/increasing transaction volume). Note: As more transactions move off-chain (exchanges, lightning, sidechains), what is considered a low RVT value will trend higher. During sustainable bull markets, the value flowing through the blockchain increases as market participants also increases. This results in sideways RVT Ratio movement.
Historically, RVT90DMA has broken below a value of 10 at the start of a bull market, maintained these values until the early bear market, and then shot above due to decreasing relative demand.
In the chart above, please disregard the NVT Value.
Extending the RVT90DMA value to today, you can see that it has once again fallen, indicating another bull market.
While it has not returned to <10 (it reached 12 and rose up to 15), as I mentioned above, as more bitcoin move off-chain, the values indicating bull markets will have to be adjusted. To me, this seems very close, especially seeing how much exchange volume has grown compared to on-chain volume (please see the next chart).
You can see from the above graph, that starting January 2019, exchange volume actually started to exceed on-chain transfer value!
In addition, Bitcoin’s first sidechain, liquid, went live on October 2018, taking even more volume off the mainchain. Taking these factors together, I believe gives strong evidence that RVT demonstrates we have entered a bull market.
2YearMA:
2yrMA is used as the buying line, and 5(2yrMA) is used as the selling line. Buying when Bitcoin drops below the buying line, and selling when it exceeds the selling line, has historically generated large profits. As you can see on the zoomed in graph next, we have barely just dropped the 2yrMA once again. This seems to support the reaccumulation theory supported before.
What if, rather than this recent market drop being a reaccumulation, it is the worst possible situation? A failed bull run, and a continued bear market? Let’s see if evidence points to that being a market top around July 2019.
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
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