Bitcoin: November 2017

On October 13, 2017, when Bitcoin was quoted at $5,640, we said the following:

“We are throwing in the towel on taking the $7,166.29 [our upside target] figure, and any future upside targets that go uncorrected to the tune of –50% or more, as something we can feel confident is worth the speculation.”

Our upside target of $7,166.29 has come and gone.  Now comes our updated downside targets for those mindful of the risks.

To arrive at our downside targets, we need to point out what we’re not looking for as the price of Bitcoin falls.  We are not looking for the kind of declines that have materialized after our 2014 recommendation that speculators get into Bitcoin.  What has been the record of Bitcoin declines from $177 to $7,458.79?

peak trough % change
$764.04 $552.82 -27.65%
$1,129.87 $775.98 -31.32%
$1,280.87 $935.95 -26.93%
$3,018.55 $1,938.94 -35.77%
$4,950.72 $3,226.41 -34.83%
$7,458.79 $5,857.32 -21.47%

The average decline, in the range from 764.04 to 3226.41, has been –31.30%.  Taking the most extreme decline of –35.77%, we have to expect that even a fall of –40% would still draw in enough new speculators to take the price to the prior high.

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Now that we have defined what we are not looking for, below are the revised downside targets.

  • Conservative target: $2,922.99
  • mid range target: $2,704.61
  • extreme target: $2,486.36

There are two consistent patterns that have emerged in Bitcoin that we can point out so far.  First, when the bubble bursts the price of Bitcoin always achieves the conservative downside target.  Second, in the run-up since 2014, the decline has been approximately half of the amount between the conservative target and the prior peak.  What does this mean to us?

A decline in price below the $5,000 level would be somewhat alarming as this type of price decline, a fall below a prior peak, has not occurred in a long time.  This would put Bitcoin on target to hit the $3,729.40 level.  If the $3,729.40 level is reached then we’d expect that the $2,922.99 level would be next.

“The more intense the craze, the higher the type of intellect that succumbs to it.” –Benjamin Anderson

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