Older models may be injecting wishful thinking into Bitcoin (BTC) predictions. The Bitcoin price decay model aims at a more conservative prediction curve.
A new model has been proposed, to track the potential price moves of Bitcoin (BTC). The decay model is more conservative, taking into account the unique opportunities during the earlier days of Bitcoin trading.
The decay model was created to challenge previous curves, especially the prominent Rainbow chart and Stock-to-flow (S2F) model. Long-term models aim to complement sentiment metrics that focus on short-term trades. The S2F and rainbow model also predict the behavior of BTC once a bull cycle occurs. For instance, the Rainbow model predicts that for each bull cycle, the price will rally at least to the orange zone.
Also Read: Dave Portnoy accepts Bitcoin as payment for sponsorship
A model based on halvings is also skewed toward rapid growth and a fast move to a higher price range. The decay model takes into account more factors that can limit the price of BTC to a more rational level, in line with available liquidity and market sentiment.
The decay model takes into account the upper side of the BTC price chart, instead of charting just the years-long trend of higher lows. This results in a diminishing growth boundary, reflected in the current subdued bull market.
The model reflects the 2024 reality of failing to rally to the $100,000 range, as expected due to the cycle of halvings. Instead, BTC achieved a smaller cycle top, but also a smaller drawdown, erasing just 29% of its value. Previous cycles offered bigger growth, but also drawdowns of at least 70%.
Unlike other models, the decay chart does not plot the upper bound of BTC as an exponential move, avoiding the over-optimistic scenario. Cycle tops are also based on historical data, and not on scenarios suggesting irrational buying or hyper-bitcoinization.
The decay model still envisions new highs for BTC at nearly 300% the current price, though with gradual growth until 2030.
I bring you: The Bitcoin Decay Channel™
. . .
1/ There are a number of #Bitcoin price guides both inside and outside the X sphere; oscillators/indexes for short-term trading, and projections for longer-term planning. The Decay Channel is the latter but is the basis for an… pic.twitter.com/ciwzEeP7gA
— Sminston With (@sminston_with) July 17, 2024
Critics still side with hyper-optimistic models for Bitcoin peaks
Critics of the model see the mistake as having BTC peaks slow down to zero. Instead, a more balanced decay model was proposed, where BTC prices would still have bubble peaks, along with long-term appreciation.
The other problem with the model is that it counts BTC peaks as rational and predictable. Some analysts see the cycle lows as more data-rich, while peaks as irrational events that can happen on top of unexpected factors.
Super-cycle models allow for outlier price peaks, not limited by an upper bound. The Rainbow Chart does not put limits on the upside, but warns of bubble conditions above a certain price.
Failing patterns can happen in both bear and bull markets. For Bitcoin, there are proponents of optimistic models that see the price as rallying with no rational bounds, given the right market conditions.
Other models focus more on the downside, which is considered the riskier direction for BTC, due to panics and subsequent loss of trust.
Some models mix the long-term price action with a short-term risk indicator. The risk model takes a complex indicator of current risk, aiming to predict whether BTC has run the course of its recent price move. BTC risk indicators also suggest different market phases and coin behaviors. In the current market, the long-term risk indicator is coming down, to levels not seen since before the start of the bull market in 2023.
Also Read: Eurozone interest rate holds at 3.75% as ECB prepares for September rate cut
Combining short-term indicators with long-term trends is also giving a preview of BTC momentum. After the current rally, the BTC momentum indicator is in the red again, suggesting that the climb may become harder. Based on momentum indicators, BTC may repeat a scenario from 2013 and rally, but also stall and correct similarly to 2019.
In the short term, BTC showed its ability to recover the $65,000 level. Current models see BTC as staying above $60,000. BTC traded at $65,182.97 after a brief recovery, though trading volumes are slowing down again. The market adapted to no new inflows of USDT tokens, and now liquidity is shifting between several potential earners.
Funds flowed into BTC again, as the leading coin also grew its dominance to 54.1%, leaving altcoins and tokens to lag behind.
Cryptopolitan reporting by Hristina Vasileva
