Anyone who follows Bitcoin knows how it has a history of dramatic price swings.
But that history, when translated to a logarithmic Bitcoin price prediction chart, shows that over the long term, the price of Bitcoin has followed a distinct pattern as it has moved higher.
And that suggests several more steep jumps lie ahead for the preeminent cryptocurrency that will push BTC not only past its all-time high of just under $20,000, but far beyond it, past $50,000 in the near term and ultimately to $250,000 or even $1 million.
Prateek Goorha, an interdisciplinary social scientist with an interest in the economics of innovation and creativity, has written two blog posts analyzing the phenomenon, which he calls the "parabolic supertrend" in Bitcoin.
The basic idea is that each major Bitcoin price jump has come as the result of three distinct phases....
What Bacteria Can Teach Us about Bitcoin Price Moves
It turns out that Bitcoin's price behaves a lot like bacteria.
Each major price move has included a phase of stasis, an exponential phase of rapid growth, and a phase of decline. These cycles have driven the price of one bitcoin from mere pennies in 2010 to thousands of dollars.
In that context, the recent 70% decline isn't as ominous as it might seem. This chart, first created by an internet crypto technical analyst who goes by "Parabolic Trav," does a good job of showing how Bitcoin's periodic sharp declines haven't broken the overall pattern of parabolically higher prices.
Take a look:
The gains may not look dramatic at first glance, but this chart uses a logarithmic scale rather than a linear scale. So what you're seeing are percentage gains.
Goorha's posts on Medium likens what's happening to the life cycle of bacteria in a Petri dish.
During the stagnation phase, he says, the bacteria are "acclimatizing to the environment," resulting in "little to no growth." That's followed by an exponential phase in which the bacteria "begin propagating by cell doubling" as they channel the available resources into growth.
In the third phase, as resources are exhausted, there's a decline in the bacteria population.
When applied to Bitcoin, the community of users is comparable to the Petri dish, with the fiat money invested (be they U.S. dollars, Japanese yen, euros, or South Korean won) the resource feeding growth.
Periods of selling starve the system of resources and result in a decline. Eventually the decline stops as the Bitcoin market adapts to these circumstances. The next phase is triggered when Bitcoin's "Petri dish" - the number of users - gets bigger, introducing fresh resources to the system.
In an e-mail, Goorha explained that the infusion of fiat money into Bitcoin "fuels the growth of the network, much like oxygen fuels the growth of bacteria."
So while Bitcoin has experienced several periods of steep decline, the arrival of the next cycle prevents the price from falling to levels seen in previous cycles.
Take Bitcoin's first bubble, for example. BTC soared from $0.95 to $32 then all the way back down to $2.00 - a 94% drop. But even so, the price of Bitcoin ended up twice as high as where it started.
The same thing happened in late 2013, when Bitcoin rocketed to nearly $1,200 from less than $100 in under four months. In the long decline that followed, Bitcoin did briefly slip below $200, but spent most of 2015 in the $220 to $275 range - more than twice the launch point from mid-2013.
That brings us to the present. What can the parabolic Bitcoin price chart tell us about 2018's disappointing performance? And what does it forecast for the years ahead?
This remarkable ride is far from over...
A Bitcoin Price Prediction for More Exponential Gains
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One would assume that last year's jump to an all-time high of nearly $20,000 was a blue "exponential growth" phase, but the chart says otherwise.
According to Goorha, we've been in a "stasis" phase since last fall. That includes the spike to the all-time high.
"My view is that we have been in an extended yellow period of stasis," Goorha told me in an e-mail. "Several factors have changed all of a sudden and we are still struggling to figure out their relative effects," he said, listing such major developments as expectations for a Bitcoin ETF, the development of the Lightning Network, the debut of custodial services, and possible manipulation of the futures markets. "This uncertainty keeps us stuck solidly within the yellow rectangle."
That means the rise to $20,000 was just a prelude to a much bigger move to come. I imagine it may be comparable to what we saw in 2013.
In early 2013, Bitcoin leapt from under $15 to over $230 in less than four months before slipping back below $100. A dramatic move, to be sure. But the chart shows the move to $230 was in the stasis phase.
The exponential phase came later that year, in November, when Bitcoin spiked to nearly $1,200.
If it's true we're in an extended stasis phase now, the next exponential phase isn't far off. And when it hits - most likely within the next six months to a year - it will propel the price of Bitcoin somewhere at least to $50,000 and possibly close to $100,000.
Such an event is consistent with catalysts we know are in the works and are capable of drawing in the sort of fresh resources (fiat money) needed to fuel the move. I'm talking about things like the Lightning Network, which will greatly expand the speed and capacity of the Bitcoin network, as well as the likelihood of a Bitcoin ETF and the desire of large investors to gain exposure to this new asset.
It's also consistent with several of the more ambitious Bitcoin price predictions from prominent figures such as Fundstrat co-founder Tom Lee ($125,000 by 2022), venture capitalist Tim Draper ($250,000 by 2022), and the ever-colorful anti-virus pioneer John McAfee ($1 million by 2020).
The chart suggests we'll continue to see several more cycles, which would push the Bitcoin price to McAfee-like levels.
Of course, there are no guarantees the Bitcoin price will continue to follow this pattern. But there's no denying Bitcoin has already enjoyed parabolic gains over the past eight years.
I wouldn't bet against it.
About the Author
David Zeiler, Associate Editor for Money Morning at Money Map Press, has been a journalist for more than 35 years, including 18 spent at The Baltimore Sun. He has worked as a writer, editor, and page designer at different times in his career. He's interviewed a number of well-known personalities - ranging from punk rock icon Joey Ramone to Apple Inc. co-founder Steve Wozniak.
Over the course of his journalistic career, Dave has covered many diverse subjects. Since arriving at Money Morning in 2011, he has focused primarily on technology. He's an expert on both Apple and cryptocurrencies. He started writing about Apple for The Sun in the mid-1990s, and had an Apple blog on The Sun's web site from 2007-2009. Dave's been writing about Bitcoin since 2011 - long before most people had even heard of it. He even mined it for a short time.
Dave has a BA in English and Mass Communications from Loyola University Maryland.