What next for Bitcoin? Some perspective

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Avatar for mypathtofire
2 years ago
Topics: Bitcoin, BTC, Crypto, Investing, Analysis, ...

Bitcoin is 40,9% off the all-time high that it reached 4 months ago on the 10th of November. If we look at the below chart I have compiled, it would require a greater than 66,67% gain to reach that high again!

The further Bitcoin falls from here, the greater the climb it will have to reach a new ATH. This could be a make or break time for Bitcoin.

Looking further, a 66,67% gain may seem like a lot, but it is still below the mean average annual gain of bitcoin of 93,8% and the highest gain in one year of 302,8%. This means that this gain could reverse inside 1 year quite easily.

What about the downside? We are currently -40,9% and the largest loss per year was -72,6%. That means we could statistically still have some further downside potential although this would then be approaching an extreme example.

An interesting fact is that the largest daily price fall in Bitcoin was -37% in March 2020, but also the largest daily gain in recent times was 42%.

This means that it may not even take a year to reverse this current position and we can continue to expect large price movements that fall outside a normal distribution. This is because Bitcoin has a high standard deviation.

However, when checking the recent Price Volatility, we can see that it has been relatively stable lately. Although it seems to be creeping upwards with larger swings, it is still within tolerance.

Here we can see the large peak from March 2020 at the start of the corona pandemic. This time with the outbreak of war with Russia, we did not see a similar rise. The reasons for this are unknown, but Bitcoin's correlation with other assets has been falling.

Has Bitcoin maintained its value by working as a safe haven asset for both sides during this crisis? It could also be the high gas fees, therefore trading has taken place more with stable coins or another crypto that uses smart contracts.

With the high volatility, it is no wonder a DCA strategy is the preferred choice for the Bitcoin investor! I've just increased my frequency of purchases!

Resources

  1. https://freebitco.in/site/blogs/bitcoin-price/btcs-42-gain-was-the-third-largest-daily-gain-in-bitcoin-price-history/

  2. https://www.buybitcoinworldwide.com/volatility-index/

  3. https://ycharts.com/indicators/bitcoin_average_transaction_fee

  4. https://sfoerster-5338.medium.com/bitcoins-risk-and-return-explained-in-7-amazing-charts-that-you-ve-never-seen-before-6173fe87ef7

  5. https://www.upmyinterest.com/fund?tick=Bitcoin

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Avatar for mypathtofire
2 years ago
Topics: Bitcoin, BTC, Crypto, Investing, Analysis, ...

Comments

Thanks for the insights!

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2 years ago