The recent pullback is a good thing. Bitcoin has been on a wild ride, mostly an upwardly wild ride. Anyone who monkeys in the stock market knows the temptation of over-watching market fluctuations. Daily changes, hourly changes, minute changes, second changes. They can drive you batty. Let's step back and look a the bigger picture.
Last year was, obviously, great for bitcoin. The chart below shows gains from $3-ish to $1200-ish. That's pretty good I'd say.
The recent fluctuations have been food for critics to criticize, but I see them as a good thing. Remember the history. First, in the Spring/Summer of 2011, the price went from about $1 up to $30. Then it "crashed" and established a new base level at about $5. This past April, Bitcoin went from around $35 up to $220, then "crashed" and established a new base level at about $100. When the recent “China collapse” occurred after hitting $1200, the pullback did NOT pull back to $100, its previous base-level for about 7 months. Rather, it has gained support between $600 and $800. Bitcoin seems to be establishing a new base level there. It only dipped below that level once, briefly (see graph below). A gain from $3 or $4 or $5 up to about $700 is pretty good I'd say.
Going forward, who knows. But, for the fun of it, rather than focus on the ups-and-downs, let's brush out an overall average. The graph below shows a yellow line, very roughly following the general trend. (And, yes, I know of log scales, just don't like them.) The trend looks good.
Slap another year on the graph, continue the trend, it looks very, very good. That's an ending price of about $3100 at the end of 2014. Who knows? Certainly not me, but it looks good.
Too optimistically silly? I get that. Let's scale back the enthusiasm. Brush out the 2013 trend in one even broader brush stroke, as below…
Slap another year on the graph, continue the overall trend, it still looks very good. The ending price then for 2014 is about $1200. “That's where it was November 2013!”, you say. Yes, but that ridiculous growth was entirely unsustainable. Which is why I opened this blog post writing that the recent pullback is a good thing. By falling back to about 50% of where it peaked, then establishing support, bitcoin is prepping its next move.
An analogy: when gas was about 33 cents a gallon back in the early 70s, that was the established base-level. It had been roughly around there since the beginning of the gas-age. By 1980, it broke to $1 a gallon. It established that price-level as a base for some 20 years. Then it broke to $3+ per gallon. Its established there now. Do you really think we'll ever go back to $1 a gallon? 33 cents a gallon? Will bitcoin get back to $100? Maybe. $5, I doubt it.
Originally published on http://satoshitimes.wikidot.com
December 30, 2013
LINK: http://satoshitimes.wikidot.com/blog:5
Although dated, this is being posted here on the Hive blockchain so that it's archived.
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