Now that its officially 2020, and we have the halving coming up this year its time to revisit and update the Bitcoin Report I wrote in 2019 and upgrade it to the 2020 Bitcoin Price Guide. In this guide we will cover everything from the basics of Bitcoin all the way to some more advanced conversation about price and market cycles.
If you want to download the original report I wrote in April 2019, you can download below…
What Is Bitcoin?
Bitcoin (BTC) is a deflationary, decentralized digital currency that was created in 2009 by an anonymous online persona called Satoshi Nakamoto and his associate Hal Finney. This is a digital currency with a limited supply (21 million bitcoin), its mined (aka created) by a network of participants who setup everyday equipment in a special way in order to help process transactions, this is down on whats called a blockchain (copy of the same protocol run on each computer and updated daily).
There is a lot of revolutionary aspects of Bitcoin, it runs on an older SHA-256 bit technology but the inflation rate is cut at every halving period as is the mining reward (reward that miners get for helping to run to the network). If you ever got into torrent downloading with seeders, leachers, etc this may sound similar to that.
Some quick BTC facts in case you are skimming…
- January 3, 2009 Bitcoin network was created
- Bitcoin.org registered in August 2008
- Satoshi Nakamoto kept 1M BTC (pre-mined)
- 21 Million total supply of Bitcoin
- Estimated 3-5M missing/lost (including Satoshi’s 1M)
- 95% of wallets contain less than $100USD worth of BTC
- Fun fact: Bitcoin’s Wiki page has over 200 citations, not a lot of pages do
Law of Supply & Demand
We can’t talk about Bitcoin without covering at least the basics of Supply and Demand which unfortunately most retail investors still don’t know its definition or really how it operates in markets like this.
Here are the basics…
- The law of supply states that as supply goes up, price goes down because sellers are more likely to supply.
- The law of demand states that as supply goes down, price goes up because there is an actual scarcity of the product/goods
- These two laws interact with each other and determine the actual market prices and volumes of traded goods in a market
Now, there is more to it than that and more complex aspects of Supply & Demand like equilibrium, movement and shifting but we will stick to the basics.
In around 98 days or so (Estimated May 23rd 2020), Bitcoin will go through its third halving where the amount of bitcoin that is mined each day is cut yet again from 1800 BTC per day to just 900 BTC per day. By May of this year 85% of ALL bitcoin (18,375,000 BTC) will have been mined. This will also be the first time ever that a speculative investment vehicle has a lower inflation rate than the Federal Reserves target 2% inflation rate. Bitcoin will cut from 3.8% inflation to just 1.8% inflation. Again, this will be a first.
Historically Bitcoin responds well to halving events price wise, but it takes some time, usually 6-12 months after a halving have we seen dramatic price action.
- November 28th 2012 1st halving– Price went from $13- $1,032 in 1 year, 82x price multiple, 8,113% ROI
- July 9th 2016 2nd halving– Price went from $651- $2,518 in 1 year, 3.9x price multiple, 287% ROI
- May 23rd 2020 3rd halving– ???
Some key points in case you are skimming…
- The halving is expected to happen May 23rd 2020 (date may change, based on mining)
- Only 900 bitcoin per day will be created after the 2020 halving vs 1800 per day
- 85% of bitcoins will have already been mined at the time of halving (18,375,000 BTC)
- Annual Inflation rate cut from 3.8% to 1.8% (central banks target rate 2.0%)
- First time ever inflation will be less than that of Federal Reserve and central banks
- After the halving only 3.15 millions bitcoin will be left un-mined
Every single market on the planet follows some sort of macro (big time frame) cycle where over a certain amount of time it goes up, and a certain amount of time it goes down. There is a really common cycle you will see across history that has happened over and over again and that is the “boom/bust cycle” or sometimes labeled the bubble cycle. You probably know this as the Wall St Cheat Sheet
Here is another way you have probably seen this shown…
Here are some examples of the bubble cycle in markets, lets start early on with Tulip mania.
Enron, Lehman Brothers, Gold, Bitcoin, the entire stock market, everything goes through hyper growth bubble phases and bust cycles where it corrects.
Macro viewpoints is one of the easiest and lowest stress ways to track a risk asset and if you have limited time to track a portfolio, that is an ideal way to do it.
Bitcoin is just about 11 years old now and actually there still isn’t that much data available on Bitcoin because most exchanges didnt’ start tracking data until 2012, so we have this window of 3 years of the early Bitcoin price action missing and with just two halvings in the books (which signify big price flection points) there aren’t a hole lot of predictable models to follow on the macro scale.
There are no quarterly earnings reports, CEOs to come and talk on TV, investors to close for series A, B, C rounds and the fundamentals are rocky at best. Remember the narrative for Bitcoin in the original white paper was to be a CASH system, but Bitcoin has failed at that and personally I think the best use case/narrative to go with would be the ‘store of value’ angle. This would works because its easy enough for people to move in and out of FX back into Bitcoin, it could be better, I mean for an asset thats almost 11 years old it could have a lot more integration but right now its at least doable.
Because of what I stated above, naturally one of the easiest models to make would be measuring the distance between bubbles or macro tops which depending on who you ask could be three or four cycles. Lets look at the data…
|Parabolic run time||7 weeks||5 weeks||6 weeks||5 weeks|
|How far did it fall?||90%||83%||87%||84%|
Now some leave out the 2013 cycle peak completely and just use 2011, 2014, 2017 cycle peaks which paint a picture that over time the duration between cycle peaks has gotten longer, the ROI smaller but price jump greater. The end result for every cycle is a retrace of at least 83%.
If we stuck with just the 3 cycle peaks mentioned above that would be exactly 574 more days it took each cycle peak and put the next cycle peak at around July 30th 2023, at around $150k price per Bitcoin, taking a total of 2051 days.
|Days To Cycle Top||329||903||1477||2051|
This is the issue I see with going off the cycle tops, I will show you a model going off the cycle bottoms here in a few minutes but first lets jump to some lower time frame models that people have attempted.
Through 2017, there was a pretty clear 60 day cycle that was running before it completely broke that to go parabolic in the ATH cycle peak towards the end of the year. Right when the 60 day cycle was calling for price to head down to $5700, it instead went parabolic up to $19k. The bottom of that next cycle was an actual 89 days, which to be fair it wasn’t exactly 60 days before that point and tracking at the smaller time frames like this I think is still a great indicator.
Bitcoin 4 Year Cycle
Now lets talk about the model that I am the most bias towards on the macro and that is to measure the duration off the bottoms, not the tops. This has presented itself to be roughly a 4 year cycle, give or take a few.
|Cycle 1||Cycle 2||Cycle 3||Averages|
|Days of bull run||973||1069||?||1021|
|Days of parabolic||327||268||?||297.5|
|Days of correction||411||360||?||385.5|
|Days into cycle|
|Days after halving|
We haven’t had the cycle 3 yet, which is why all but one of the fields is a question mark at this point. One thing that should be really clear at this point is that market cycles are never perfect, it will never be exactly the same amount of days in any market. you see there is a decent amount of variance between the two current cycles using this model.
Rough ROI during parabolic periods of both cycles
|Cycle 1||Cycle 2||Average|
If we projected and assumed a bit here, it would put the price of Bitcoin somewhere between $90,000-$140,000 with again an average of 210 days of parabolic growth, leaving plenty of time for retail to get involved and make money.
Now to be clear, this could happen, and it might not happen, this is simply a model and we keep an eye on it and see if its following along.
Something I did want to highlight here is the days after the halving that Bitcoin went parabolic which was 135 days after first halving and 286 days (roughly) after second halving, giving us an average of 210.5 days. That puts us on December 14th 2020.
Here is a visual…
Bitcoin Price Predictions
Back in 2017, I made a price prediction when we were over $10k that we would see Bitcoin at $40,000 that year, that proved to be quite wrong. The blow off top lined up quite well with the launching of the Bitcoin futures markets on December 17th and 21st. Later we found out from the Ex CFTC chairman that president Trump had fast tracked Futures markets in an attempt to tame Bitcoin and pop the bubble.
Without that event, we can all agree we would’ve seen a much different outcome. I mention all of that to make the clear point that we must do our best to deal with the real facts that are in front of us right now, do as much back testing and model analysis as we can on that data and create a plan moving forward. The situation with Bitcoin could change anyday for better or worse.
You have heard my price prediction above in the Bitcoin 4 year cycle section, lets look at some famous predictions.
John is famous for making an outlandish and certainly crazy Bitcoin price prediction of $1 million by end of 2020. Here is his original tweet.
Max has been a proponent of Bitcoin since the early days (when Bitcoin was just $3) and has been talking about digital currencies ever since. Max has set a few Bitcoin price predictions, both back in Sept 2019 where back to back he stated that Bitcoin will cross over $28,000 “anytime now” and then said the following about longer term price
“the price will reach $100,000 per bitcoin no earlier than 2021 and no later than 2028. After 2028, the price will never drop below $100,000.”
“We have now the deglobalization and dedollarization, which would be superseded by the age of individual sovereignty. And the way…is through bitcoin. If you have your keys, it’s unconsfiscateable and it’s hard money. “Max Keiser Bitcoin Price Prediction
Tim Draper famous VC who is estimated to have between $350M-$500M in crypto alone has become pretty vocal about his bold Bitcoin price prediction of $250,000 over the past few years.
Here is his popular statement
“It’s pretty likely that we’re gonna hit $250,000 by end of 2022 or early 2023 based on customer adoption of Bitcoin and I think it’s spreading. “Tim Draper Bitcoin Price Prediction
Here is a recent video interview that is worth a watch.
Thomas Lee founder of Fundstrat investment firm has been a Bitcoin bull for a long time, that being said has also been pretty far off on his analysis, which one could excuse in this market.
“When you look at this on a log basis, the idea that Bitcoin will get there would be consistent with the idea of generational trade. I don’t know if 24-months is how long it will take. “Thomas Lee Bitcoin Price Prediction
Recently Fundstrat released their 2020 outlook, here is a peak…
Bearish Bitcoin Price Predictions
And of course we can’t talk Bitcoin price without mentioning Bill Gates, Warren Buffett or Charlie Munger who are all active opponents of Bitcoin.
“As an asset class, you’re not producing anything and so you shouldn’t expect it to go up. It’s kind of a pure ‘greater fool theory’ type of investment… I agree I would short it if there was an easy way to do it.”Bill Gates Bitcoin comments
Leading economist from Vanguards investment strategy group states Bitcoin is a poor store of value, claiming its too volatile and recommends people invest in something more tried-and-tested.
“I think Bitcoin will be worth a tiny fraction of what it is now if we’re headed out 10 years from now…I would see $100 as being a lot more likely than $100,000.”Ex IMF Chief Kenneth Rogoff Bitcoin Price Prediction
Bitcoin is “probably rat poison squared”
“In terms of cryptocurrencies, generally, I can say with almost certainty that they will come to a bad ending,” the chairman and CEO of Berkshire Hathaway said then. “If I could buy a five-year put on every one of the cryptocurrencies, I’d be glad to do it but I would never short a dime’s worth.”
“We don’t own any, we’re not short any, we’ll never have a position in them”Warren Buffett Bitcoin comments
There you have it, our 2020 Bitcoin Price Guide all laid out with everything you need to better make decisions on what you do with your hard earned dollars!
Speaking of dollars, did you know we have a premium yearly subscription that gives quarterly reports more in-depth then what you just read, daily emails, webinars and much more helping you understand market structure, cycles and group think behavior, all for just $1 per day?