Bite This Coin
By Monish Chhabra ǀ May 24, 2021
After hitting a high above $60,000 in mid-March, Bitcoin went sideways for about 8 weeks. This was a pretty consistent high across both daily and weekly distributions of data points.
It finally resolved lower in the second week of May, along with the sell-off in other high-growth assets. Many tech, biotech and crypto assets are since down by -40% to -60% from their peak.
In statistics, a quantity can take many different paths from one point to another. The path can also change along the way, as new observations unfold. Yet, that quantity may reach the same destination over time.
If the underlying thesis of Bitcoin stays intact, the question is what path it may chart hereon, and to what destination.
Tail of the coin
The following graph shows the history of Bitcoin; the longer-term in blue (over the last 7 years) and shorter-term in orange (since the last big bottom in Dec 2018).
The two green lines show the high-probability zone in which Bitcoin’s price oscillates over the longer-term, and the red band shows the same for the shorter-term.
Based on what statistics shows us as the downside of Bitcoin, as of now, there is
o 70% chance it will fall to the low red line, around $28,000 - $30,000 range.
o 20% chance it will fall to the low green line, around $20,000 - $22,000 range.
Head of the coin
The following graph shows where Bitcoin can be headed, over the next 2 years.
The blue-dotted line shows the average trendline over the longer-term (the last 7 years). The orange-dotted line shows the average trendline over the shorter-term (since the last major low in Dec 2018).
These dotted lines are not projecting the top or bottom of the cycles. They are estimating the mid-point of the trend; which is more reliable value among the range of possibilities.
The future 2-year projections of the value of Bitcoin show that by the mid of 2023,
o The longer-term trend has an average value of about $150,000.
o The shorter-term trend has an average value close to $200,000.
Toss of the coin
Bitcoin fell close to $30,000 recently, and may test or breach that level soon. For someone who believes in its underlying draw and buys around that level, the risk vs return trade-off is quantifiable.
At $30,000, Bitcoin can lose a third of its value on the downside.
By the year 2023, it can be 5-times this price on the upside.
Without the use of leverage, options, or small-caps; we haven’t seen odds this good in a trade for a long time.
This write-up is for informational purpose only. It may contain inputs from other sources, but represents only the author’s views and opinions. It is not an offer or solicitation for any service or product. It should not be relied upon, used or construed as recommendation or advice. This report has been prepared in good faith. No representation is made as to the accuracy of the information it contains, nor any commitment to update it.