Bitcoin Storm Tracker: Feb 27th Weekly Recap and Projection

TL;DR - Dip Came early and strange market conditions, but still bullish using the current LPPL model.

• Price action shows a sooner and lower dip than anticipated, but appear to be consolidating this week as expected.

• The market actually appears to be heating up, as more frequent oscillations moved the critical date by which we expect a collapse to early June 2021.

• While recent movements may spook those new to Bitcoin, it’s not that much different than those experienced in 2017. In fact, the local corrections have stayed below 30% on the daily price chart, which is less volatile than those experienced in 2017.

• Experimenting with an “overheat-o-meter” (still a work in progress): we appear to be in a consolidation zone of $39k-$55k, and will overheat above $55k. The next consolidation zone appears to be $55k-$75k.

I would like to remind readers this post is a purely educational exercise. I’m fitting models based on data and am probably wrong. Don’t construe this analysis as investment advice, I am not an investment advisor and you should seek one out before making decisions with your money.

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Whew, this week’s Bitcoin price action has cast some uncertainty over the market. Simply put, it appears the 30% dip predicted last week has arrived early. There is no reason to think the underlying bull market has changed, but at least for now the market has taken a breather.

Comments from Treasury Secretary Janet Yellen, repeating the same some money laundering FUD she shared in January, contributed to a downtrend many news outlets attributed to Elon Musk. Musk posted a tweet that the “price do seem high” despite adding $BTC to the Tesla balance sheet only a few weeks prior. This might be a bit of an inside joke, where he posted a similar tweet about Tesla stock in May 2020. Weirdly, Musk responded to a pro-bitcoin reply to the May 2020 tweet with “Bitcoin Anime” well before $BTC was apparently on Tesla’s radar. We know know that Tesla’s stock surged through the rest of 2020, so maybe this was actually Musk expressing bullish sentiment?¹

With the new model fit, we can expect some sideways action and a possibly a dip to as low as $40k over the next week. The $40k daily close is an important level to keep while still staying bullish, and overall we expect some upwards pressure to develop over the next week.

Despite the general market wisdom that dips are healthy, it appears the early dip increased the frequency of oscillations predicted by the model. This implies that the market is actually heating up more than it appeared it was. If this were the case, as the model now predicts, we could see a steep climb in the next few weeks to ~$80k, indicating that we might be approaching the end of the cycle faster than originally thought.

On the other hand, the recent shift might just be temporary, and longer consolidation during the month of March might give the opportunity for the price to cool off, and we could be back on track for the previously anticipated top sometime in the Fall.

Analysis: Recap

Bitcoin will keep you humble, and this past week did seem to be fairly unlikely according to the model. If you notice the lower dashed green line in last week’s forecast, we appear to have been consolidating around that level. This week’s forecast sees a potential for a temporary dip to as low as $39k, and then upwards pressure up.

I see some combination of last week’s and this week’s forecast as presenting two possible future trajectories. As discussed above, this week’s forecast anticipates the market will further heat-up, while last week’s forecast predicted general consolidation.

Critical Date

Looking at the “critical date”, the recent dip actually seems to indicate the market is heating up. The expected date for a big correction has moved to early June. Overall, this change in trend points to a more unstable market than before, but things still look bullish. That said, conditions do appear to have changed, and the parameters estimated in the LPPL model reflect that.

Philosophy: Historical Comparison

I first started learning about Bitcoin in earnest in 2017. As others have pointed out, I think it’s useful to look at historical trends to see if current price action seems “normal.” Much has changed since 2017, so this comparison should not be made too seriously, but I think it provides some useful perspective.

In particular, we appear to be in the second dip of a typical bubble-like price behavior, very similar to what was seen in 2017. The big second dip in September 2017 was followed by a quite extreme upwards trend until the blow-off top mid December. I should add however that we appear to be oscillating faster than in 2017. This could be due to greater availability of leverage and bigger market players swinging around more capital than the largely retail driven 2017 run. In 2017 we had a blow off top within 3 months of the second dip. The current model predicts a “critical date” within a similar timeframe. I would not want to rely on this comparison too heavily, but it may provide food for thought.

Philosophy: Stair step overheat-o-meter

This past week, I’ve been thinking a bit about how the oscillations in the LPPL model could provide an idea of expected consolidation regions in the market. You should see the general waves formed by the LPPL model. If we look at the low-end of the next wave, this forms a level indicating when the market will be over-heating. In other words, the green regions form “consolidation zones” the red above these zones are “caution: over heating zones”, and the red zone below are “model assumptions violated zones”.

I’m planning to experiment with tracking the price using these zones in the next week. The current consolidation zone is around $39k-$55k, above which we may be over heating again. When overheating we expect a run up, with the next consolidation zone around $55k-$75k.

That’s it for this week, be sure to check out past updates for more details on the models and ideas around future trends. Thanks for reading!

1. Injecting my own Hopium here…