Every year i post an outlook using entropic methods explained in the technical section of this blog. Here you can find the 2015, 2016, 2017 and 2018 forecast update, where you can find more information about this approach.
Updated values for bitcoin (in brackets values of last year) using daily data since August 2010 (average data of 4 main exchanges when possible).
BTC/USD | |
Growth Factor G | 1.00088 (1.00280) |
Shannon Probability P | 0.5222 (0.5384) |
Root mean square RMS (see this as volatility) | 0.058 (0.059 ) |
Bitcoin’s entropic values versus the Usd deteriorated in 2018 although volatility has fallen a little bit, the Growth Factor (G) decreased down to 1.00088% compounded daily or 138% yearly down from 280% of 1y ago. Also the optimal fraction of your total wealth to invest in bitcoin dropped a bit in 2018 with a 4.4% instead of 7.7% of 1y ago (0.522*2=1.044 – 1 = 0.044 or 4.4% roundable to 5%)
Generally these values are still much better then conventional markets except the Shannon Probability that now match the US Stock Markets (around 0.522); it means that out of 100 days an asset goes up 52 days and down for 48 days, on average.
2019 Price forecast | Full Historical Volatility | Half Historical Volatility |
Forecast using only G* | ~5269$ | ~5269$ |
Upper bound adding volatility | ~16150$ | ~9230$ |
Lower bound subtracting volatility | ~1720$ | ~3000$ |
*5269 is obtained with 1st January as a starting price (around 3820$) times (1.00088^365)=~1.37 | 3823*1.37=~5269, just change 365 with the number of days you prefer for a different forecast.
Using different approaches the support area for 2019 is around 1700$-3200$ while the resistance price area is above 9000$.
What went wrong in 2018?
A year ago, I forecasted a maximum top of $121000 never reached during the year. I halved the volatility factor (rms) to find a more realistic price level and i obtained 68000$, a value missed again by BTC/USD.
This market has been very weak all the year but the definitive sign of weakness has been the breaking of the support around six thousand dollars followed by an important minimum at about 3100$, a price level that I showed you a few months ago.
In that tweet i identified an additional support area from 2100$ to 3200$ that so far has not yet been visited.
If possible I recommend to buy inside this price area otherwise another trading opportunity will be to buy on strength when BTCUSD will break above the monthly 5 periods Kama average (i’ll tell you when with a tweet), this average is now around 5000$ but next month will probably drop to 4800$ .
Conclusions
For this year i think that i’ll consider the support/resistance levels obtained with a full volatility value with the result to have for the whole 2019 a good probability to stay inside the 1700$-16000$ price zone.
At the same time i think that at the end of a strong buying climax period, if any, it will be wise to reduce your bitcoin investment if the price goes above 30k USD (price calculated using the equivalent of 1.5 times the historical volatility of bitcoin while the initial 16k usd target is calculated using the historical volatility)
I’m at your disposal for any questions; see you at the next update and Happy New Year!