Bitcoin's Genesis Fibonacci Spiral
The chart above shows the price history of Bitcoin since its genesis Fibonacci spiral.
Throughout this post, I will refer to the concept of a Fibonacci spiral. To put it simply, in the context of a price chart, I conceptualize log-scale bull flags as Fibonacci spirals (though both bull and bear flags, as well as pennants, can be conceptualized as Fibonacci spirals). If you'd like to better understand why I conceptualize these chart patterns as Fibonacci spirals, you can read my post here:
Below, I will explain my methodology in developing this chart, and subsequently, I will provide a commentary on the future of Bitcoin's price action.
Methodology
To capture Bitcoin's genesis Fibonacci spiral, as shown in the posted chart, I took the following steps:
(1) First, I searched for Bitcoin using the symbol "BTCUSD" and selected the "Bitcoin All Time History Index" option. This step is important because no other dataset has a longer price history of Bitcoin, and thus no other dataset can accurately produce Bitcoin's genesis Fibonacci spiral.
(2) Second, I defined Bitcoin's genesis Fibonacci spiral as beginning at Bitcoin's lowest price point. Bitcoin's lowest price point (that is measurable as a unit of U.S. currency) is $0.01. Bitcoin was at this price in 2010.
(3) Third, I used the "Fib Retracement" tool to draw the first Fibonacci spiral. To construct this genesis spiral, I placed the Fibonacci retracement tool on the lowest price point for Bitcoin ($0.01) and then traced up to the highest point that Bitcoin achieved before it underwent its first log-scale golden ratio retracement.
See the chart below for a close-up of the genesis Fibonacci spiral using a log scale.
Note: Since the golden ratio is an irrational number and therefore technically unachievable, whenever I use the phrase golden ratio, I mean golden ratio approximation. Additionally, it is important to note that in the case of all Fibonacci spirals, the primordial spiral only weakly approximates the golden ratio, but over time, each successive spiral converges more closely toward the golden ratio, also known as Phi. If this does not make sense to you, and you want to better understand this concept, you can check out the animation: linked here
(4) Finally, I applied successive, logarithmically-adjusted Fibonacci extensions. Bitcoin's price continues to respect these levels. More theoretically, Bitcoin's price does not just respect these levels but its price is actually bounded by them, (along with being bounded by an infinite series of fractal Fibonacci spirals across all other timeframes).
For a more in-depth discussion of the infinitely fractal series of Fibonacci spirals that guides price action, you can see my post below.
On a more practical level, the significance of properly identifying the genesis Fibonacci spiral is that it potentially creates a powerful predictive model. In the chart below, we can see that all halving cycle peaks occurred at or nearly at a Fibonacci extension level of Bitcoin's genesis Fibonacci spiral (when analyzed on a higher timeframe closing basis).
Commentary
How much lower might Bitcoin's price fall?
If the above Fibonacci spiral chart provides predictive value, then Bitcoin's price is likely heading down to the 3.618 log-scale extension level of its genesis spiral, as shown below. This level is Bitcoin's prior halving cycle peak. Just note that the 3.618 level is a prediction based on the closing price for the higher timeframe candles. That is to say, it does not mean that a lower wick will not form below this level.
How high will Bitcoin rise during its next halving cycle?
First, the answer to this is technically unknowable. While price will always tend to be bounded by Fibonacci levels, the exact Fibonacci level that will define Bitcoin's next peak is ultimately influenced by the introduction of seemingly random events. With that said, if the above Fibonacci chart generally provides predictive value, the best approximation that I can make for the next halving cycle peak is shown in the chart below.
The coming halving cycle is particularly noteworthy in that it presents two major Fibonacci extension resistance levels in close proximity to one another: the 4.236 and 4.272 levels. Bitcoin is unlikely to surpass both of these levels on a quarterly chart closing basis in the next halving cycle. If Bitcoin rises above 150k during the next halving cycle peak, I would be looking to take profit and sell ahead of the next cycle back down. With that said, I would not be terribly surprised to see an upper wick close to 200k. On the other hand, if the central banks keep their money supply tight for years to come, and Bitcoin adoption is slow, I also would not be terribly surprised to see Bitcoin begin to falter at any price above 100k during the next halving cycle impulse wave.
Why use a log scale chart for Bitcoin?
Since Bitcoin moves in an assumed logistic growth curve, a log scale chart provides the best overall visualization of its price action. While using a log scale is generally less important on low timeframes, it becomes essential on high timeframes. Using a log scale helps one to better visualize the inhibition of growth that the passage of time presents. That is to say that each halving cycle is likely to be less impulsive than the previous halving cycle, and similarly, each halving cycle sell-off will likely be less dramatic. This results in Bitcoin's price becoming generally more stable over time.
How can I use this chart to trade on the lower timeframes?
One of the amazing attributes of log-scale Fibonacci levels is that additional log-scale Fibonacci levels can be drawn within the bounds of each set of higher-order Fibonacci levels. This reflects the recursive or fractal nature of Fibonacci patterns.
To illustrate this, let's zoom in on a weekly chart that shows Bitcoin's current price, which is bouncing between the 3.618 and 4th Fibonacci extension levels.
If we draw Fibonacci retracement levels that are bounded by these two major extension levels, we see that price is also respecting these lower-order Fibonacci levels. See the chart below.
If we zoom in even further, to the 4-hour chart, and again draw log-scale Fibonacci retracement levels as bounded by a set of Fibonacci levels of the higher order, we can see that, once again, price is respecting these Fibonacci levels.
In theory, Bitcoin's price is only ever bounded by Fibonacci levels. It is just the case that sometimes it might not appear that way because of one's frame of reference. On a theoretical level, every movement in the price of Bitcoin conforms to a Fibonacci spiral on some timeframe, but also on all timeframes. These spirals can take price upwards or downwards, thus resulting in spiral patterns appearing even if one inverts the chart.
In the coming year, I plan to write a longer piece about Investing in Cryptocurrency that is research-based. For now, I hope this chart of Bitcoin helps someone out there in understanding the nature of Bitcoin's price action.
Thank you for the privilege of your time in reading my post.
Throughout this post, I will refer to the concept of a Fibonacci spiral. To put it simply, in the context of a price chart, I conceptualize log-scale bull flags as Fibonacci spirals (though both bull and bear flags, as well as pennants, can be conceptualized as Fibonacci spirals). If you'd like to better understand why I conceptualize these chart patterns as Fibonacci spirals, you can read my post here:
Below, I will explain my methodology in developing this chart, and subsequently, I will provide a commentary on the future of Bitcoin's price action.
Methodology
To capture Bitcoin's genesis Fibonacci spiral, as shown in the posted chart, I took the following steps:
(1) First, I searched for Bitcoin using the symbol "BTCUSD" and selected the "Bitcoin All Time History Index" option. This step is important because no other dataset has a longer price history of Bitcoin, and thus no other dataset can accurately produce Bitcoin's genesis Fibonacci spiral.
(2) Second, I defined Bitcoin's genesis Fibonacci spiral as beginning at Bitcoin's lowest price point. Bitcoin's lowest price point (that is measurable as a unit of U.S. currency) is $0.01. Bitcoin was at this price in 2010.
(3) Third, I used the "Fib Retracement" tool to draw the first Fibonacci spiral. To construct this genesis spiral, I placed the Fibonacci retracement tool on the lowest price point for Bitcoin ($0.01) and then traced up to the highest point that Bitcoin achieved before it underwent its first log-scale golden ratio retracement.
See the chart below for a close-up of the genesis Fibonacci spiral using a log scale.
Note: Since the golden ratio is an irrational number and therefore technically unachievable, whenever I use the phrase golden ratio, I mean golden ratio approximation. Additionally, it is important to note that in the case of all Fibonacci spirals, the primordial spiral only weakly approximates the golden ratio, but over time, each successive spiral converges more closely toward the golden ratio, also known as Phi. If this does not make sense to you, and you want to better understand this concept, you can check out the animation: linked here
(4) Finally, I applied successive, logarithmically-adjusted Fibonacci extensions. Bitcoin's price continues to respect these levels. More theoretically, Bitcoin's price does not just respect these levels but its price is actually bounded by them, (along with being bounded by an infinite series of fractal Fibonacci spirals across all other timeframes).
For a more in-depth discussion of the infinitely fractal series of Fibonacci spirals that guides price action, you can see my post below.
On a more practical level, the significance of properly identifying the genesis Fibonacci spiral is that it potentially creates a powerful predictive model. In the chart below, we can see that all halving cycle peaks occurred at or nearly at a Fibonacci extension level of Bitcoin's genesis Fibonacci spiral (when analyzed on a higher timeframe closing basis).
Commentary
How much lower might Bitcoin's price fall?
If the above Fibonacci spiral chart provides predictive value, then Bitcoin's price is likely heading down to the 3.618 log-scale extension level of its genesis spiral, as shown below. This level is Bitcoin's prior halving cycle peak. Just note that the 3.618 level is a prediction based on the closing price for the higher timeframe candles. That is to say, it does not mean that a lower wick will not form below this level.
How high will Bitcoin rise during its next halving cycle?
First, the answer to this is technically unknowable. While price will always tend to be bounded by Fibonacci levels, the exact Fibonacci level that will define Bitcoin's next peak is ultimately influenced by the introduction of seemingly random events. With that said, if the above Fibonacci chart generally provides predictive value, the best approximation that I can make for the next halving cycle peak is shown in the chart below.
The coming halving cycle is particularly noteworthy in that it presents two major Fibonacci extension resistance levels in close proximity to one another: the 4.236 and 4.272 levels. Bitcoin is unlikely to surpass both of these levels on a quarterly chart closing basis in the next halving cycle. If Bitcoin rises above 150k during the next halving cycle peak, I would be looking to take profit and sell ahead of the next cycle back down. With that said, I would not be terribly surprised to see an upper wick close to 200k. On the other hand, if the central banks keep their money supply tight for years to come, and Bitcoin adoption is slow, I also would not be terribly surprised to see Bitcoin begin to falter at any price above 100k during the next halving cycle impulse wave.
Why use a log scale chart for Bitcoin?
Since Bitcoin moves in an assumed logistic growth curve, a log scale chart provides the best overall visualization of its price action. While using a log scale is generally less important on low timeframes, it becomes essential on high timeframes. Using a log scale helps one to better visualize the inhibition of growth that the passage of time presents. That is to say that each halving cycle is likely to be less impulsive than the previous halving cycle, and similarly, each halving cycle sell-off will likely be less dramatic. This results in Bitcoin's price becoming generally more stable over time.
How can I use this chart to trade on the lower timeframes?
One of the amazing attributes of log-scale Fibonacci levels is that additional log-scale Fibonacci levels can be drawn within the bounds of each set of higher-order Fibonacci levels. This reflects the recursive or fractal nature of Fibonacci patterns.
To illustrate this, let's zoom in on a weekly chart that shows Bitcoin's current price, which is bouncing between the 3.618 and 4th Fibonacci extension levels.
If we draw Fibonacci retracement levels that are bounded by these two major extension levels, we see that price is also respecting these lower-order Fibonacci levels. See the chart below.
If we zoom in even further, to the 4-hour chart, and again draw log-scale Fibonacci retracement levels as bounded by a set of Fibonacci levels of the higher order, we can see that, once again, price is respecting these Fibonacci levels.
In theory, Bitcoin's price is only ever bounded by Fibonacci levels. It is just the case that sometimes it might not appear that way because of one's frame of reference. On a theoretical level, every movement in the price of Bitcoin conforms to a Fibonacci spiral on some timeframe, but also on all timeframes. These spirals can take price upwards or downwards, thus resulting in spiral patterns appearing even if one inverts the chart.
In the coming year, I plan to write a longer piece about Investing in Cryptocurrency that is research-based. For now, I hope this chart of Bitcoin helps someone out there in understanding the nature of Bitcoin's price action.
Thank you for the privilege of your time in reading my post.
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