BTC Multi-Year Patterns
Dear Readers,
The aim of this article is to review the relatively recent price action of Bitcoin within the context of those grand cycle theories, and to point out that while the current pattern is similar and consistent with the past, there are also significant differences. Further, these differences themselves will be shown to be perfectly explicable with the LGC model as projected since 2018.
While the LGC model is not primarily a four year model [rather, a converging and plateauing channel], it can in turn accommodate the multi-year patterns. As the distortions and differences of the multi-year pattern can be accounted for by the LGC model, it can be seen as a wider concept/ model with more explanatory and predictive power for price development than one based solely on multi-year repetitions.
In turn, the practical element of this is to off-set an overly bearish sentiment that can develop when the price is still relatively high and in a consolidation range. In balancing out the bearishness, one can remain sufficiently bullish, where the aim is to profit from an ongoing macro bull market in Bitcoin despite the corrections that come along the way. And so to the chart.
Review of the LGC
The primary concept/ theory is the logarithmic growth curve [first charted in 2018], from which arises the model of a converging and plateauing channel that functions in predicting the multi year, indeed multi-decade, range within which price is likely to develop. As seen it has a logic of its own. The channel as projected in 2018 has required no redrawing of the lines, where price can be seen to have remarkably observed it these past six years… indeed, testing its bounds a good five times, with price currently poised midway.
Here charted are the peaks following a four year pattern. Noticeable is the anomaly of sorts with the peak of ‘21, where price was first front-run to be followed by a double peak. Where this was extremely disorientating to those adhering solely to 4 year cycle theory, the LGC model predicted such a ‘capping’ of price. With the correction and then the second run up, a 4 year cycle could be said to have run its course though not in the way that was expected. It’s fair to say that 4 year cycle theory still has some traction while the LGC channel remains an over-arching model… literally [and until falsified/ invalidated].
The Technical Differences within the Multi-Year Pattern
The most obvious technical difference of course is that of ‘diminishing returns’ as measured on the vertical y axis, which could also be termed the ‘ROI’ axis [return on investment]. Besides the macro differences on the y axis, as most are only too familiar with, is the difference to keep in mind in the more immediate term.
What I’ve in mind here, at these current elevated prices, is the actual decline in percentage terms of price in the current range. Where we feel those recent declines running into the multiple of thousands in nominal/ price terms as large, the actual corrections in real, percentage and ROI terms, as measured on the log y axis, is a lot less [I’ve previously referred to the focus on the number/ price as a form of money illusion].
Therefore, the log value of the y axis is an important datum to keep in mind going forward as it functions to minimize the significance of the size between the nominal numbers on the chart and that between the the recent peaks and lows. To illustrate:
Where the $15,000 [the difference between the peak and the lows of the range] seems a huge figure, in percentage terms it is not… especially after a 4.6x rise. The actual 23% consolidation is on a par with the earlier 2023 consolidation within a range. Technically, there is no huge consolidation to write home about with price still in a relatively stable upward technical pattern as highlighted by the modest rate of appreciation of the upward diagonal. No parabolic moves here as of yet. It is perfectly reasonable to interpret this price action as technical consolidation within the wider context of an ongoing multi-year pattern… despite the bearish sentiment to the opposite.
Zooming Back Out to the Macro
Overlaid on the 4 year pattern [bottom to bottom] are the real fib retracements [measuring ROI/ real values on the log y axis] within the confines of the LGC model. Notice that we are halfway into the run to the top on the basis of that pattern. Though the projection gives a price higher than many are expecting, it also gives a subsequent correction lower than many are expecting [to something like current levels].
From the contrarian perspective, this makes a lot of sense as the market usually functions to frustrate the many. That this model is not wildly popular, despite its performance, also adds to its validity from the contrarian perspective.
Lastly, a chart showing the projected percentage decline from the peak showing diminishing volatility/ increasing stabilization of the price on the macro as you’d expect with a currency/ asset in the process of capitalization. On this modeling, if it were to play out in some way along these lines, the investor/ trader would want to be thinking of a strategy by which to be taking some profits… dependent of course on one’s time preference.
If a play on volatility is the mode in which this is to be done, then a look at the extra volatility expected in alt/ USD may go some way toward achieving that goal. This would enable one to sit on their core long-term BTC position while taking profits in alt/ USD trades… to have one’s cake and eat it also so to speak.
Until next time,
Stay [relatively] safe out there,
Dave the Wave.