Logarithmic Bitcoin Price Chart Shows Similarity Between Previous Market Cycle and Current Market Conditions

January 2, 2019 / by Zachary Mashiach

Bitcoin’s price increased by five orders of magnitude from 2012 through late 2017, where an order of magnitude is equivalent to a 10X (1,000 percent) price increase. This makes it difficult to look at the full history of Bitcoin with a linear chart since the rise of Bitcoin’s price from less than $1,000 to $20,000 during 2017 dwarfs all of the previous historical data. On a linear Bitcoin price chart, the data from 2012 to 2016 looks like a nearly flat line (see chart) despite Bitcoin having plenty of significant price movements before 2017.

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Image courtesy Bitcoinwisdom.com. Upper chart is Bitcoin’s price in $. Lower chart is volume in Bitcoin. Linear scale.

On a logarithmic chart, the space between price levels becomes increasingly condensed as price rises, and this reveals the true nature of Bitcoin’s price action from 2012 to 2016. A logarithmic chart makes it easier to compare Bitcoin’s current market cycle to past market cycles.

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Image courtesy Bitcoinwisdom.com. Upper chart is Bitcoin’s price in dollars. Lower chart is volume in Bitcoins. Logarithmic scale.

It is noticeable that the rally that brought Bitcoin to over $1,000 for the first time in late 2013 and the late 2017 rally where Bitcoin hit $20,000 look similar on the chart, despite the peaks of the rallies being over an order of magnitude apart. This suggests that the market dynamics during the current market cycle and the previous cycle are similar, and therefore the data from the past can perhaps be used to predict the future.

In the logarithmic chart, it can be seen that, after the peak of the rally in November 2013, the market did not hit bottom until January 2015, and the bottom was not a single point. It was a drawn-out process that lasted through September 2015.

It took Bitcoin 13 months to hit its lowest price levels during the bear market, and the price of Bitcoin persisted near a bottom for 8 months. In total, the bear market lasted 21 months. Once the bull market started, it took Bitcoin 17 months to return to the all-time high around $1,100, yielding a total market recovery time of 38 months, a little over three years.

The current Bitcoin bear market has been ongoing for just over 12 months so far, and if past market behavior is a good predictor for the current market, the first 3 quarters of 2019 will be defined by Bitcoin’s price bottoming. The bottom is a process not a point, and Bitcoin hit its lowest levels near $3,000 only a couple of weeks ago in mid-December, and it is not certain that this is the lowest Bitcoin’s price will go.

If the current bear market follows the pattern of the previous bear market, then perhaps this bear market will end in late 2019. A recovery to the previous all-time high of $20,000 would not be expected until early 2021. A new all-time high would not occur until the end of 2021, and with simple extrapolation, this all-time high could be in excess of $100,000.

Past data is not a solid indicator of what will happen in the future, especially since there is relatively little historical data for Bitcoin. Therefore, using a logarithmic chart to make these predictions is not certain to be accurate. However, the striking similarity between the past market cycle and current market conditions makes it possibly useful to make predictions like this since similar market dynamics may be at work.