Top Analysts Look At Past Bitcoin Price Cycles To Predict the Return of Volatility
The cryptocurrency bear market continued in October, causing these innovative assets to trend lower as they fluctuated within a modest range.
Investors have adopted a “‘wait and see’ approach,” noted analyst Joe DiPasquale, which has caused several of these digital assets to trade range-bound.
Several major cryptocurrencies suffered losses during the month, and the broader digital currency market lost value. However, these declines were modest compared to those of several other periods.
The overall digital currency market lost close to 8% during the month, according to the MVIS CryptoCompare Digital Assets 100 Index (MVDA), a key benchmark based on the value of the top 100 largest digital assets.
Bitcoin held up reasonably well, peaking at $7,234.83 roughly halfway through the month, a roughly 9.8% increase from the digital asset’s starting price of $6,589.36, additional CryptoCompare data reveals. Bitcoin later retreated, erasing its gains for the month and closing the period 3.9% lower at $6,332.24.
Bitcoin cash, a fork of the original bitcoin, did not fare as well, experiencing some notable fluctuations and for the most part following a downward trend. The altcoin fell more than 20% in October, finishing the month at $424.16 after starting the period at $534.33.
XRP, the digital token created by Ripple’s founders, also suffered a rough month, losing more than 30% of its value in a matter of weeks. The digital asset’s price dropped to as little as $0.3761 on October 11, roughly 35% below its price of $0.5767 on October 1. The XRP later rebounded, cutting some of its losses but still finishing the month down 21.7% at $0.4513.
Ether, the second-largest digital currency by market capitalization (market cap) at the time of report, also suffered some notable losses, declining more than 18% during the first few weeks of October.
As a result, the price of ether fell to $186.88 on October 11, compared to $229.09 at the start of the month. The digital currency proceeded to rebound in the coming weeks, finishing the period at $197.41, a 13.8% loss for the month.
EOS, a digital currency linked to a platform used for decentralized applications, had a relatively stable month, experiencing modest declines during October. The EOS digital asset fell to $5.00 on October 11, down more than 11% from its opening price of $5.65.
The digital currency then recovered, eliminating some of its losses and finishing the month at $5.25. At this price, it was down more than 7% for the month.
Crypto Bear Market
At this point, the question of everyone’s mind is “When will the bear market in digital currencies end?”
The broader market trend could last another 12-18 months, predicted Arthur Hayes, co-founder and CEO of Seychelles-based cryptocurrency exchange BitMEX, told Yahoo Finance UK.
When explaining this forecast, he pointed to past bear markets.
“I’m just basing it off my previous experience. I started in bitcoin in 2013 when the price went from $250 to $1,300 and then 2014 to 2015 was sort of the nuclear bear market. Price crashed, volume crashed — very, very difficult to make money.”
When asked about this prediction by CryptoGlobe, most analysts disagreed. One market observer in particular who did agree with Hayes’ forecast of a sustained bear market was Eric Ervin, CEO of Blockforce Capital.
“We agree with the overall sentiment of Arthur’s comment,” said Ervin. Our current bear market has not been unusually long, he asserted. Ervin added:
Since 2010, there have been 4 bull cycles followed by 4 bear cycles. The average bull market lasts 449 days, and bear markets have lasted an average of 306 days, a ratio of 1.47. The last bull market lasted 818 days, so by this methodology our bear market length should be about 557 days, or an additional 241 days to the current 316 day bear market.
“The previous bitcoin bull markets were caused by both speculation and believers, and we feel confident that the next catalyst for a bull market will be institutional adoption,” he noted.
Other analysts offered rosier views on the digital currency markets. DiPasquale, CEO of cryptocurrency fund of hedge funds BitBull Capital, described bitcoin’s “stability around the $6,000 level” as a “great sign,” emphasizing that it gives the digital asset “plenty of room to shoot up in positive market conditions.”
“As for the bear market lasting another 12 – 18 months, we don’t believe that the market is going to follow such a schedule,” he stated.
DiPasquale emphasized that the market’s future direction “depends on positive developments, and the next couple of months are going to be interesting due to the launch of Bitcoin settled futures, new custody services, more institutional investments flowing into crypto and progress in terms of ETF proposals.”
Digital currencies could break out of their relative malaise soon, at least according to technical analysis performed by Jon Pearlstone, publisher of the newsletter CryptoPatterns.
“October through December are usually the most volatile time period for most markets (see most 2017 crypto charts as a good example) so timing says we will see a move out of the current price range and increased volatility sooner than later,” he noted.
“When the current price range breaks ‘for real’ expect strong volume and high volatility with the first upside target at $7250 and a test of $5000 if we break down below 2018 lows,” said Pearlstone.
Another helpful resource for predicting the market’s future movements is sentiment data, which can be calculated by culling information from platforms like Twitter and determining whether it is positive or negative.
Cryptocurrency analytics platform The TIE supplied this exact information, which is forward-looking and predictive in nature.
“We generated monthly sentiment scores from 0-100 and we charted out the correlation between the change in monthly sentiment vs. the change in overall crypto market cap,” explained Joshua Frank, co-founder of The TIE. We “saw an extremely strong correlation between the two variables,” he added.
Source: The TIE
“For October we saw a 42% increase in sentiment meaning that we are predicting positive price movement in the overall Crypto market in November. The correlation between the change in coin sentiment and change in overall market cap is greater than .5 which is tremendously high.”
As for whether digital currencies will break free of their malaise in November, only time will tell. One thing we do know is that countless eyes will be watching.