Bitcoin (BTC) What If: Return to the Mean

January 23, 2019 / by Bill Noble

It seems that when Bitcoin has entered a period of apathy and quiet despair.

There was a tweet yesterday from a marquee crypto Twitter figure saying he was more interested in shorting Apple (AAPL) and trading day alts than he was in Bitcoin (BTC). CNBC published an article yesterday from the Davos conference. The headlined mentioned Bitcoin going to zero.

This got us thinking. What would people feel like if there was a rocket move higher in Bitcoin (BTC) and they got caught sleeping and missed it?  How painful would it be to get caught sleeping when Bitcoin (BTC) ripped higher?

Looking at the standard chart marking the different stages of a bubble (Figure 1), the final stage coming after “despair” is “return to the mean.”  To us, the long term mean is usually the 200-day moving average. In Bitcoin (BTC) that level is $5,756.

Figure 1

In terms of timing, we noticed that the total crypto market is headed for a Fib circle inflection point in early February (Figure 2). Perhaps that is the date range when the market will get clarity on whether or not Bitcoin (BTC) can revert to mean.

Figure 2

Bottom Line: Given the listless range between Gann support at $3,551 and the 21-day moving average $3793 (Figure 3), thinking about $5,756 might seem ludicrous — which is exactly why you should think about it.  

Figure 3