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Could Bitcoin have bottomed out?

22 Mar 2019   #Bitcoin

Every similarity between Bitcoin and gold show that Bitcoin might have bottomed and is set for another spectacular rise. On the other hand, many people are lamenting the fall of Bitcoin and what this has meant to their cryptocurrency holdings. Some traders have noticed peculiar similarities between Bitcoin and gold that show that there is considerable light at the end of the tunnel.

Let's take a look at the good and the bad views of the Bitcoin and gold similarities and what they mean to your long term investment portfolio.

Historical analysis

Twitter user CabSav noticed something pretty interesting when comparing the lifetime trading values of gold and Bitcoin. When they took the charts of both commodities (though many people would hesitate to call Bitcoin a commodity just yet), they noticed that gold's long term chart and Bitcoins ongoing cycle match up very closely.

We can see that both gold and Bitcoin had impressive highs followed by large dips. It does bear mentioning that gold's position took decades to drop and stabilize whereas Bitcoin has had the same movement in a much smaller time frame. Just two years in fact. The key here is the stabilization before a final dip in the price, after which gold rallied on the back of the 2008 recession. Could Bitcoin follow a similar path to gold's historical rise?

Many traders say that the market is cyclical, and this can be cross-applied to commodities with historically similar trends, with Bitcoin coming in close as it is known to many on the market as digital gold and for a good reason.

The Good News

If historical trends bear out, then Bitcoin is set for another meteoric rise. The analysis was done by Cane Island Crypto backed up by Bitcoin evangelist Alec Ziupsnys, shows that there is a reason to believe that Bitcoin has bottomed out and is set to start rising with an expectation of Bitcoin setting a new all-time high sometime in late 2021.

How high? That remains to be seen. The parabolic trends shown by Bitcoin could have it being valued at slightly over $50 000 by 2022. The short term outlook looks just as good with an expected price of $7800 by the end of 2019.

However, that is all based on Bitcoin following the parabolic curve, and the term "history does not repeat, but it does rhyme" that drives certain analysis of assets such as Bitcoin.

The Bad Side

Cane Island Crypto included a caveat with their projections and labeling Bitcoin as parabolic. It assumes that so-called "jackleg exchanges" do not have much undue influence and manipulate the market.

This is a serious caveat and one that introduces significant risk to anyone looking to put a portion of their wealth into Bitcoin now when the many are saying it has bottomed out. There is also the issue of looking at gold without taking into account the difference in time and price scales between the two assets.

Gold dropped from a high of $800, while Bitcoin dropped from a high of $20 000. Gold bottomed out at $250 while Bitcoin bottomed out at $3150. That is not even looking at the time scales involved. As mentioned previously, "history does not repeat, but it does rhyme" means that people who are looking to manipulate the market would know better when to do it compared to previous manipulators.

However, many in the cryptocurrency field are confident that the nature of crypto will stop thins from being too much of an issue, particularly with a strong cryptocurrency like Bitcoin.

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