NEW LOW OBSERVER

In the coming days, we will issue a price projection for Bitcoin based on the work of Edson Gould that we have not used in the past.  Before we submit this future price projection, we need to offer a brief review of our prior work on Bitcoin using the work of Edson Gould and Charles H. Dow.

Below are the highlights of our work on the topic of Bitcoin and the price of Bitcoin at the time the commentary was made:

• April 10, 2013 at $165.00 (note: using Mt. Gox Index)
• “The current parabolic increase in Bitcoin has a conservative downside target of $89.45 and an extreme downside target of $76.05.”
• actual low at $66.34 on July 5, 2013

• November 19, 2013 at $541.83
• “It seems that Bitcoin has experienced a temporary peak in the price.” “Our conservative downside target for Bitcoin, based on the peak closing price of $785.50 is $384.83.  The extreme downside target is $261.83.  The worst case scenario is for Bitcoin to fall as low as $152.83 as indicated by the red line on the chart.”
• actual low at $177.28 on January 14, 2015.
• “…the next conservative upside target is $1,154.49 if the most recent peak of $785.50 is exceeded.”
• actual peak at $1,237.96 on December 4, 2013.

• November 30, 2017 at $9,916.54
• “conservative downside target at $3,739.47.”

• December 22, 2017 at $13,857.14
• “We believe that there is going to be limited upside in the near term.”
• “We think that the conservative downside target will be achieved before a new high is seen.”
• “this run-up in bitcoin (+10,828%) is only slightly exceeding that of the 2011-2013 increase of +9,771%, as seen in the chart below.”
• “In all prior booms, the subsequent bust AVERAGED –70%.”
• “conservative downside target at $6,884.31.”

• April 27, 2018 at $8,978.33
• “As of April 27, 2018, Bitcoin is priced at $9,278.22 and has achieved our target of $9,148.23 as outlined in Dow Theory.”
• “At this stage in the game, Bitcoin is in a no-man’s land.”
• “While there are always three directions that the price could go (up, down, or sideways for a long time) this juncture is strictly to be played for the extreme of going back to the $11,479.73 or $6,914.26 level.”
• “…if Bitcoin exceeds $11,479.73 it would be a huge reversal of the declining trend and could be consider the confirmation of a new bull market with the minimum upside target of $20,000.  Under the circumstances described, Bitcoin could achieve a $37,000-$52,000 level before a meaningful downside is experienced.”

We have never believed in Bitcoin.  What we have done is track the price.  Based on the work of Charles H. Dow, price informs us enough to not have faith in Bitcoin or any other assets/commodity but on the collective knowledge of the most informed participants, large and small.  Dow and F.A. Hayek’s views are summarized in the following quotes:

On February 25, 1902, Dow said:

"The one sure thing in speculation is that values determine prices in the long run. Manipulation is effective temporarily, but the investor establishes price in the end.  The object of all speculation is to foresee coming changes in values. Whoever knows that the value of a stock has run ahead of price and is likely to be sustained can buy that stock with confidence that as its value is recognized by investors, the price will rise (Dow, Charles H. Review and Outlook.  Wall Street Journal. February 25, 1902.)."

This aligns with F.A. Hayek’s 1945 claim that:

“…the shipper who earns his living from using otherwise empty or half-filled journeys of tramp-steamers, or the estate agent whose whole knowledge is almost exclusively one of temporary opportunities, or the arbitrageur who gains from local differences of commodity prices, are all performing eminently useful functions based on special knowledge of circumstances of the fleeting moment not known to others.”

Our price projection for Bitcoin will be available to subscribers only.

Notes:

• 2013-2018: Full Bitcoin Analysis
• F. A. Hayek, “The Use Of Knowledge In Society” American Economic Review, XXXV, No. 4; September, 1945, pp. 519–30.