The BTC Market Anomaly

Dear Readers,

Happy New Year y’all! Time marches on and as we all know the lapse of time is an essential component to price development in what is a very volatile BTC market. And yet, that said, perhaps price is not quite so volatile as previously… even as it moves thousands of dollars a day [see previous article for money illusion].

This first article of the new year will focus on what has to be something of an anomaly in price action as compared to previous multi-year cycles. It will look at the relative stability of price, its movement as technical as opposed to parabolic, and tie this back into something I’ve been mentioning and predicting for quite some time now - a qualitative change involving a maturing market.

The anomaly [those with a theory of regular returns/ patterns will indeed find it an anomaly] I’m referring to here is clearly visible on the longer-term chart when focused on the points where price breaks to new highs as below.

Zoomed Out

The tale previously was one of immediate elevation in price [diminished returns is a secondary issue here], where price has exploded relatively quickly out of the gate once the previous highs were broken. This time round, nothing of the sort - first price dallied about for 6 months of consolidation before making a modest break to the upside, where once again it price looks to be consolidating. Price has not gone parabolic like previously, but is moving in a more technical or stable manner.

For the longer-term investor this has to be a positive, for the previous explosive peaks only proved to be temporary. If instead price is becoming less volatile and more sustainable then we could say BTC is in a process of price discovery… a notion often referred to be back in the early days of Bitcoin.

And so to the LGC curves which have predicted this process of price discovery/ capitalization since 2018, and have held good so far.

Points to note when comparing the multi-month price action to previously:

• a slower rate of ascent, less steep, through the channel
• the channel itself is converging, contracting, offering less space for price to move
• from the macro perspective, price looks to be increasingly stabilizing

Zooming in, we can further see the more technical nature of this multi-year move.

Zoomed In

By the technical nature of this move I mean a sustainable rate of appreciation over time as seen on the chart. So for example, we see a developing bull market that has of yet not gone manic, or parabolic.

The basis of the technical move is the multi-year upward channel from the lows as depicted by the shaded area.

Price is currently high in this channel. If price were to retrace to diagonal and horizontal support at the 75K area, it would remain technically solid, and indeed set up well for those higher highs later in the year.

Of course as TA is not clairvoyance, the trader/ investor must remain alert to the possibility of price turning on a dime, where the market could become parabolic and ‘front run’ the pace of the technical target of that channel. Suffice to say here that price is solid for the investor, whereas for the trader attempting to predict shorter-term volatility a higher degree of uncertainty pertains… as per usual.

Assuming for a moment that price does continue to consolidate within the technical channel, this brings us back to the consideration that there is something anomalous about this year’s price action as compared to previous multi-year patterns [as per the first chart]. I’d suggest this anomaly is explicable with the notion of a maturing market.

BTC: A Maturing Market

As I wrote previously 4 years ago, when price was first going parabolic through 55K:

Price has effectively traversed the long term LGC channel a lot quicker than the medium term Lengthening Cycle theory predicted. And so finally back to the LGC chart, and in particular the converging channel that has so far been effective in predicting the price range. As the following chart shows, LGC would predict price to top out at around the 68K mark. Of course it could also temporarily over-shoot [as previously at the bottom it under-shot].

So crunch time it is for the LGC channel, just as it was last time. To finish, I’ll include a zoomed out view of the LGC. Though this may not offer the multi-million dollar price tag that the moon-boys are thirsty for, it does offer some macro concepts as to the endgame for Bitcoin. You have here in the plateauing price of BTC a path toward price discovery and increasing price stability, which you’d want to see in a mature currency.

You also have here in the converging channel a lessening of macro volatility as you’d expect to see in an increasingly liquid market, and one very much involving diminishing returns [relative to the returns previously lower down the curve]. All of these functions of the logarithmic growth curve are definitive of a nascent currency in the process of capitalization. I’ve as yet to majorly doubt that price will play out in something like this manner. Though of course, built into every model and theory is the ‘minor doubt’ in so far as it could possibly be invalidated. This is as it should be, and is why we always hedge both our positions and opinions.

Price ended up topping out at 69K [1K off the mark]. But the point here is not the playing out of that prediction based on the LGC, but the macro point of further explaining why an LGC itself should play out over the years and decades. The explanatory idea here is one of a maturing market, one becoming increasingly liquid and increasingly capitalized, where BTC can be considered to be a nascent and alternative currency in the process of capitalization. As the market becomes more mature in that process of capitalization, it is reflected in the development of a logarithmic growth curve [a force of nature] that becomes less volatile and works toward plateauing over time.

This in turn helps to explain the current price action - though price is making new highs it is doing so in a much more stable and technical manner. Those that have looked for the explosive parabolic pattern to repeat have been a little mystified… the ‘manic’ element required for that kind of a move seems to be missing. It’s as if the market is maturing.

Going forward with the current bull market, with both the LGC model and a maturing market in mind, I’m expecting to see a continuation of the current multi-year upward channel. What’s interesting to note is that a 170K odd price at the end of the year would not even require a parabolic/ manic market… but could well just be the culmination of a technical move.

Until next time,

Stay [relatively] safe out there,

Dave the Wave.

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