Bitcoin volatility has drastically decreased since August, trading places with tech stocks that have been experiencing huge price swings. Billionaire investor Warren Buffett, who reportedly owns 250 million shares of Apple, lost an estimated $3.5 billion in a single day of trading when Apple’s stock plunged on Friday from a close of $222.22 on Thursday to $207.48. Apple posted its worst trading day in four years on a disappointing earnings report.
While Apple stock and Bitcoin are strikingly different assets, the flip flopping volatility highlights the challenges of predicting markets and investor sentiment. Buffett, a vocal cryptocurrency critic who has massive influence among mainstream investors, and has condemned Bitcoin for its volatility, branding enthusiasts as “crazy” people, is not immune to uncertainty.
As 2018 counts down, with eight weeks left before the new year, technical analysis varies widely for Bitcoin (BTC). Currently trading in the $6,000-$6,500 range since September, BTC raced from $6,000 at the end of September last year to nearly $20,000 in December 2017.
It shows that anything can happen and that there are several technical methods lending support for a wide range of predictions.
Researcher Greg Giordano used three different econometric models to predict Bitcoin’s price by Christmas. As reported in Forbes by Giordano’s co-author Panos Mourdoukoutas, the models showed a $10,000+ spread.
“On the one side, the Hayes’ model predicts a price of $12,629.15, almost double the current price.”
“On the other side, the Wheatley model predicts a price of $816.91, a fraction of the current price.”
“Somewhere in the middle is the market model—a combination of the previous two models — which predicts a price of $8,573,56, not that far from the current price.”
As BTC’s correction period draws to a close, TradingView analyst Fakhan believes that Bitcoin is not likely to reach a new all-time high by year end. According to Fakhan, we are now entering the “smart accumulation” phase of Bitcoin.
“If we study Bitcoin’s trading history for the past eight years, we will see that there are three segments of a Bitcoin cycle. The first segment is smart accumulation. The second segment is dumb accumulation and the third segment is distribution.”
On the downside, crypto analysts such as Willy Woo, operator of Woobull.com, sees an extended bear market.
Before the CryptoTwitter troll army erupts, the data is bearish on so many touch points, we gotta be realistic in the medium term. Long term however Bitcoin is on the base of an adoption curve that will continue to drive one of the biggest bull runs in history.
— Willy Woo (@woonomic) October 29, 2018
He tracks Bitcoin and its “Network Value to Transactions Ratio” (NVT), looking for slight deviations to explain price action. He uses transaction value on the Bitcoin Network as a way to gauge utility value. The NVT moves into bubble territory if Bitcoin rises in price but transactions value remain stagnant.
In a recent interview Woo says,
“Give me a graph of the transaction throughput of PayPal and its valuation and I could probably show you that valuation tracks throughput very closely. There is a chart of mine that maps the transaction throughput and the valuation of Bitcoin and they track almost exactly. All you’re looking for is a slight deviation where one is over and one is under and that’s what the NVT Ratio is. If you divide one by the other it should be a straight line in a perfect situation, but it’s not! It deviates and that’s where you see undervaluation and overvaluation. It turns out the same as you would see in PayPal early on with high growth.”
Despite market analysis, there are several potential catalysts that could shake the cryptocurrency markets. The US Securities and Exchange Commission, for example, has been deliberating the future of a Bitcoin ETF. It is expected to rule on nine proposals on Monday.
Crypto adoption by a major customer-facing player such as Amazon, Tesla or Facebook would also have a massive impact. While tech giants like Facebook are reportedly experimenting with blockchain technology, they too are in the early stages of development.