BTC has soared over 14% this past weekend! With all the buzz happening on Twitter, let’s take a step back and examine Bitcoin's past performance throughout history to give us some insight into what the future may hold! Thread 🧵👇
To understand the past performance of BTC, one must first understand the halving cycles that BTC goes through. Every 4 years, there is what is known as “the halving”. The next halving is predicted to occur on March 25, 2024.
This means that after the halving, miners will only be able to mine half the Bitcoin they would normally be mining with the same hardware. This is due to the increase in mining difficulty, meaning that miners’ computers need to work twice as hard to reap the same rewards!
This is built into the genesis code of Bitcoin and it is by design that the scarcity of available Bitcoin depletes over time. Basic economics will tell you that if supply is reduced by ½, the demand will rise by 2 times.
Let’s take a closer look at the chart. The vertical lines are approximate previous halving dates. As you can see once a bottom is formed, the price tends to gradually climb up in anticipation of the next halving.
It is not until we reach the halving that historically, the price for Bitcoin becomes almost parabolic as supply drops, demand increases, and extreme FOMO kicks in! The next halving is due in early 2024 – will history repeat itself?
Next, let’s look at the popular stock-to-flow model courtesy of @PlanB A stock-to-flow model is a forecasting tool for Bitcoin price that shows an estimated price level based on the number of available Bitcoins on the market relative to the amount being mined each year.
This model considers the halving and subsequently color codes the chart based on months away from the next halving. Generally, although debated by some, when we are in the blue zone – this is correlated with long-term market bottoms, and when we reach the yellow/green zone.
This is generally correlated with market cycle tops. Although past performance is not indicative of future results, this all feels eerily familiar.
Below is another variation of the S2F which is the daily stock-to-flow model. We can see that generally; price likes to stay within the middle dark blue bands. Excluding some noise in the price action on the daily timeframe, we have just bounced off the bottom light blue band.
Finally, let’s look at the infamous Pi Cycle Top Indicator! The Pi Cycle Top Indicator has historically been effective in picking out the timing of market cycle highs within 3 days. It uses the 111-day moving average and a newly created multiple of the 350-day moving average.
Although we are not in a market to be thinking about market tops, this indicator can give us insights into bottoms as well. As the chart depicts, almost every time the price of Bitcoin broke below the 111 DMA, it didn’t stay below for long, before breaking above and continuing...
...the long-term uptrend. We have recently just broken above it – does this rally have steam or is it just another bull trap?This post is based on this twitter thread.