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Short Market Overview – Dec. 2019

Market Overview

The following analysis is based on the following blog post we published on March 2019:
Bitcoin Fundamental Analysis and Market Cycles

In our research, we have found that every previous four-year period between halvings can be divided into 3 distinct phases of roughly similar duration (~16 months for each phase), as can be seen in Figures 1 – 3.

These 3 phases are:

  1. Bull run: Following the halving event and characterized by an exponential increase in Bitcoin’s price.
  2. Bear market: Burst of the bubble and commencement of a bear market, with approx. 85% decrease in price from all time high (ATH).
  3. Consolidation and Slow Recovery: Consolidation period with a price recovery of ~50% from previous ATH at the end of the phase.

Based on this analysis, we managed to time the bottom that occured on December last year:
Q4 2018 Crypto Market Overview – The Bottom is In

Figure 1: First Bitcoin market cycle 15 days MA
Figure 2: Second Bitcoin market cycle 15 days MA
Figure 3: Third Bitcoin market cycle 15 days MA

Current Market Outlook

Based on the above market cycles theory, we made the following comparisons between the current and previous cycles:

Figure 4: Current cycles price divided by previous cycle price

In Figure 4, we divided the current price by BTC’s price 4 years ago. We can see that current cycle price ratio went up as high 50, but corrected back down to ~20.

Calculating the rolling average, we get ~25 price ratio, as can be seen in Figure 5.

Figure 5: “price on price” rolling average
Figure 6: Current cycles price vs previous cycle price

*Note: Both Y axes have the same ratio

In Figure 6, we can see both cycles price curves on the same chart, starting from the bottom of each cycle. Amazingly enough, we can see that despite the bull run at the beginning of 2019, price has now fully reverted to the levels of the previous cycle.

Lastly, In Figure 7, we can see where we are in terms of the bull run stage – it is still early!

Figure 6: Cycle stage timed from bottom

*Note: Both Y axes have the same ratio

Based on this analysis, we can make the following conclusions:

  1. The rally at the beginning of the year was certainly an unexpected overshoot. Such a quick violent increase demanded a strong correction and indeed, we are seeing price reverting back to our expected levels.
  2. We are at a very early stage in the cycle, in terms of time analysis, we expect the new ATH to occur roughly at Nov. 2021.
  3. Based on our market cycles theory, we expect BTC’s price at the halving (May 2020) to be around $10K – $12K.

This communication is provided for informational purposes only and does not constitute, and should not be construed as, financial, legal, investment, tax or any other advice. Alef Bit Technologies Ltd. or its affiliates and/or subsidiaries (collectively, ”Alef Bit”) normally hold as principal bitcoin, Ethereum, blockchain tokens and other cryptocurrencies or asset classes that may be discussed in this communication. 

This communication has been prepared based upon information, including market prices, data and other information, from sources believed to be reliable, but Alef Bit does not warrant its completeness or accuracy except with respect to any disclosures relative to Alef Bit and/or its affiliates. Any opinions and estimates constitute our opinion as of the date of this material and are subject to change without notice. Alef Bit may have relied upon certain quantitative and qualitative assumptions when preparing the analyses herein which may not be articulated as part of such analyses. The realization of the assumptions on which such analyses were based is subject to significant uncertainties, variabilities and contingencies and may change materially in response to small changes in the elements that comprise the assumptions, including the interaction of such elements. Furthermore, the assumptions on which the analyses were based may be necessarily arbitrary, may be made as of the date of the analyses, do not necessarily reflect historical experience with respect to blockchain tokens, cryptocurrencies or other asset classes similar to those that may be contained in the analyses, and do not constitute a precise prediction as to future events. Past performance is not indicative of future results. 

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