The purpose of this article is to advise that, on a time frame cyclic basis, we are at the normal time that a low is formed in the Bitcoin market. This means that if the market performs as it has in the past, which is certainly no guarantee, we may be near the low point between periods of price advances. Typically, Bitcoin follows phases similar to those described in ‘Dow Theory’. Spotting the low in these phases is crucial to good investment timing. Normally the best time to buy follows the end of a ‘bear’ market. At this time, pessimism is at a maximum and prices have already fallen considerably. One critical idea in Dow theory is that when everyone is pessimistic the market can only go one way, and that way is UP, because, no one, is left to sell. The same happens in reverse at market peaks. Anyway aside from the rational, Bitcoin just like the Dow moves in cycles. Following is the logarithmic chart showing the cycles clearly marked:
We can outline two basic phases in the Bitcoin cycle as follows: The first phase is a long period beginning with a sudden decline and then moving into comparative doldrums. This first phase lasts approximately 150 days or five months. The first phase is followed by a second phase of rapid market appreciation which lasts on average about two months. Looking at the chart it is possible to see that Bitcoin has played out these stages like relative clockwork. Note that market prices reach a minimum somewhere near the middle of the first phase, and a maximum at the end of the second stage. Measuring based on this and assuming the pattern repeats we should just now be at the market minimum. Examining the question from Dow Theory also gives confirmation: Market sentiment is decidedly negative. That being the case it may be true that some of the smarter money is already starting to accumulate. Note we are just 3 months now from the high of November 29. Also, note that price does usually advance during the second half of this phase just not as quickly as in the second stage. Based on this analysis and ‘technically speaking’ Bitcoin may be at a buy during this time frame.
Before we get too optimistic I would like to mention that we are still in the current bearish down channel. Please see next image:
Currently, as I am writing this article the price is breaking up but nevertheless we are still in the down channel.
I would like to point out that while the news may be alternatively bullish or bearish that the basic pattern of bitcoin transactions increases looks to be still in place. See next chart:
And finally, the Bitcoin nodes seem also to be in a continued gradual but steady increase:
If your wondering how much might price increase during the next ‘second phase’? Well, if previous history has anything to do with it between about 100 to 4,500 percent.
Update: 2014 3 6 10:00 am:
Although I did call a bit of a breakout up when I wrote this article I think there is a good chance of a trip to the bottom of the up channel on the logarithmic chart. That line is moving up quickly so in a few weeks it won’t be that far down. We may need more consolidation this time around due to the endless negative media that has nearly inoculated the population against Bitcoin. They could convince people to not breath fresh air and people wouldn’t.
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