Bitcoin

Using Power Laws to Predict When Bitcoin Price Will Reach $1 Million

Published

11 months ago

18 May, 2024

Using Power Laws to predict when the Bitcoin price will hit $1 million

The following is a guest post by Rajagopal Menon, Vice President at WazirX.

Come the bull market, come the models to predict the price of Bitcoin. In the last bull market of 2021, the Stock-to-Flow (S2F) model was the rage of the season. This model, created by Plan B, assessed the scarcity of assets by comparing stock with annual production. Applied to Bitcoin, the S2F model emphasized its “digital gold” potential and provided scarcity-based long-term price predictions. However, the S2F model disappeared in the crypto winter of 2022.

But fear not, in the current bull run, there is a new model in town – the Power Law Model, which claims to predict the price of Bitcoin with remarkable accuracy.

Understanding Power Laws

In a world seemingly full of chaos and randomness, scientists have discovered hidden patterns and relationships known as laws of power. These laws provide a framework for understanding how different phenomena interact, revealing consistent mathematical patterns that govern various aspects of our universe.

Laws of Power in Everyday Life

Power laws are fascinating mathematical relationships that appear in various phenomena, offering insights into the underlying simplicity of complex systems. They describe how two quantities relate to each other, with a change in one quantity leading to a proportional change in the other. This relationship spans different scales, from the microcosmic to the cosmic, influencing biology, society, technology and natural phenomena.

Animal size limits

Galileo’s square cube law is a classic example of a power law in nature, explaining how an animal’s size affects its strength. As animals grow, their bulk and weight increase much faster than their strength. This law establishes natural limits, explaining why larger animals have thicker bones and why larger animals are found in aquatic environments where buoyancy compensates for weight.

Metabolic rates

Max Kleber’s research on metabolic rates further demonstrates the applicability of power laws. It reveals that an organism’s metabolic rate increases to ¾ the power of its mass, indicating that larger animals are more energy efficient. This principle has a significant impact on understanding the life cycles, growth rates and sustainability of species.

Natural Phenomena and Human Activities

Power laws govern diverse phenomena, from the distribution of earthquake magnitudes to the frequency of words in a language. They explain why we observe a small number of significant events alongside numerous smaller cases. For example, Zipf’s law describes the frequency of words in languages, highlighting the disproportionate occurrence of common words compared to less frequent ones.

Beyond natural phenomena

Power laws extend to human activities such as economics, finance and technology. They elucidate the distribution of wealth, where some individuals own a significant portion of the wealth. In technology, power laws describe how content interacts on the Internet, with some highly popular and many less popular nodes forming a long-tail distribution.

Bitcoin Power Law

Astrophysicist Giovanni Santasi discovered this connection. He says 15 years of data shows that Bitcoin also follows a power law principle. Santostasi first shared the power law model on the r/Bitcoin subreddit in 2018. However, it witnessed a resurgence in January after financial YouTuber Andrei Jeikh mentioned it to his 2.3 million subscribers in a video.

Giovanni’s theory says that the price of Bitcoin is not as random as it seems. There is randomness in this, but in the long run, the price of Bitcoin follows a specific mathematical model. It’s not just a mathematical formula that some guy drew a line at; instead, it follows a power law like those observed throughout the universe.

The yellow line represents the current price and the red line represents the support line, Bitcoin’s level usually never drops below. The green line is the linear regression line, which is like the fair value price where Bitcoin will eventually return, and the purple line is the resistance line where Bitcoin typically tops out.

Predicting the future of Bitcoin

Santostasi’s Power Law Model charts Bitcoin’s price trajectory with remarkable accuracy. It features a chart showing the current price of Bitcoin, a support line indicating the level that Bitcoin typically does not fall below, a linear regression line representing a fair value price, and a resistance line marking the level that Bitcoin typically does not fall below. reaches before a recession.

This model highlights Bitcoin’s remarkably linear growth, particularly evident when outliers are removed. Despite occasional fluctuations, Bitcoin’s overall trajectory follows a discernible pattern reminiscent of other phenomena governed by power laws.

Implications for investors

The Power Law Model offers intriguing insights into Bitcoin’s potential future spikes. Santostasi’s analysis suggests that Bitcoin could peak at $210,000 in January 2026, followed by a subsequent decline to around $60,000. He goes on to predict that Bitcoin will be worth $1 million by July 2033. While mathematical models provide valuable information, they are not immune to errors and may not take into account unforeseen events that could significantly impact prices.

“All models are broken, but some are useful” means that although models may not be perfect, they can still provide valuable information. Models such as the power law model or the stock-to-flow model for predicting the price of Bitcoin have their flaws and limitations. For example, Crypto Quant’s Julio Marino pointed out problems with the power law model, such as underestimating errors and giving a misleading impression of accuracy.

Interestingly, both the power law and stock-to-flow models have faced similar criticism. Despite their flaws, they have historically made almost the same predictions for the price of Bitcoin. However, over time, they may differ in their predictions.

The question arises: if these models are correct, why bother with traditional investment strategies like the 60/40 portfolio? Some argue that new models that explain Bitcoin’s behavior could offer better returns.

While some may think these models are useless, others, like the speaker, believe they still have value. Scarcity, driven by Bitcoin’s fixed supply, plays a role in its price appreciation. Furthermore, factors such as M2 growth also influence the price of Bitcoin.

Although models can provide useful information, they cannot predict the future. Even if the models are flawed, Bitcoin’s trajectory appears upward. Therefore, although it is essential to consider these models, it is also essential to recognize their limitations.

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Bitcoin

What to watch for in the markets

Published

9 months ago

21 July, 2024

SatoshiTimes Staff

Photo: Andrew Harnik (Getty Images)

After witnessing one of the largest global IT outages on record, affecting the travel, finance and healthcare sectors worldwideThis week is set to see more political drama, events, and earnings reports from tech giants.

Donald Trump’s ‘Lovefest’ Sets Jamie Dimon Up for Consideration for Treasury Secretary Job

Let’s take a look at what awaits us:

Major companies will release their earnings reports

Major tech companies and others will release their earnings reports this week, paving the way for what the second half of 2024 will look like.

Monday

Verizon will report earnings before the start of operations.

Tuesday

Coca-Cola, Comcast and UPS are all set to report earnings before the market opens.
Tesla will report earnings in the morning, while General Motors will report earnings in the evening.
Alphabet and Visa will report results after the market closes.

Wednesday

AT&T will release its report before the market opens.
Ford and Chipotle will report earnings after the market closes.

Thursday

Earnings reports from AstraZeneca, American Airlines and Southwest Airlines will be released before the market opens.

Trump to speak at Bitcoin conference

Presumptive Republican presidential nominee Donald Trump will speak at the next Bitcoin Conference in Nashville, Tennesseewhich is scheduled for July 25-27. While this is the first time a presidential candidate will attend the conference, it has sparked a debate over whether the crypto-friendly Trump will receive support from the crypto community in the upcoming election.

In addition to Trump, independent presidential candidate Robert F. Kennedy Jr. will also discuss crypto during the conference. Crypto advocates such as ARK Investment’s Cathie Wood, MicroStrategy’s Michael Saylor, and whistleblower Edward Snowden are among some prominent names who will be participating in the conference.

Ether ETFs are on the way

New Ether Spot ETFs are set to begin trading on Tuesday, July 23. Much like the spot Bitcoin ETFs, these ETFs will allow investors to buy the second most popular cryptocurrency like stocks. BlackRock, Ark Invest/21Shares, VanEck, Grayscale, Fidelity, Bitwise, Franklin Templeton, and Invesco/Galaxy Digital are all set to offer Ether ETFs. Crypto asset manager Bitwise predict that trading in the Ether ETF will drive the price of Ether higher, potentially surpassing $5,000.

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Bitcoin

Cryptocurrency’s Biggest Winners and Losers in a Second Trump Presidency

Published

9 months ago

21 July, 2024

SatoshiTimes Staff

Cryptocurrency’s Biggest Winners and Losers in a Second Trump Presidency

Bitcoin miners and cryptocurrency companies that have been blocked from going public in the U.S. could ultimately be the biggest winners in the digital asset world under a second Donald Trump presidency. Foreign companies at risk of losing market share could end up being the biggest losers.

That’s the view that’s taking hold among market participants and observers in the wake of the former president’s growing embrace of cryptocurrency as his chances of election grow. survey released Thursday by CBS News showed Trump with the majority — 52 percent — of likely voters in his likely November rematch with President Joe Biden.

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Bitcoin

Bitcoin, Ethereum, Solana and Cryptocurrency Markets Look Ready to ‘Send’ as Stars Align, According to Investor Chris Burniske

Published

9 months ago

21 July, 2024

SatoshiTimes Staff

Bitcoin, Ethereum, Solana and Cryptocurrency Markets Look Ready to ‘Send’ as Stars Align, According to Investor Chris Burniske

Cryptocurrency investor Chris Burniske says Bitcoin (BTC), Ethereum (ETH), Solana (SUN) and the cryptocurrency market in general seem poised for a run.

Former Head of Cryptocurrency at ARK Invest account his 292,200 followers on social media platform X that several catalysts are aligning, suggesting that digital asset markets are on the verge of a bull run.

According to Burniske, a partner at venture capital firm Placeholder, the highly anticipated launch of Ethereum-based exchange-traded funds (ETFs), Republican presidential candidate Donald Trump speaking at an upcoming Bitcoin event, and the current state of the BTC, ETH, and SOL charts all suggest significant optimism for the cryptocurrency markets.

“With ETH ETFs set to go live, Trump speaking at The Bitcoin Conference, and BTC, ETH, and SOL charts looking [they do] (while stocks are weak), it’s hard to imagine a world where we don’t ship next week.”

Reuters recently reported that preliminary approval for ETH ETFs has been granted as the Bitcoin Conference is scheduled to take place from July 25-27.

BTC, ETH, and SOL are trading at $67,333, $3,528, and $174 at the time of writing, respectively.

The venture capitalist too provides an update on his prediction that the total crypto market cap will eventually hit $10 trillion. According to his chart, the path to $10 trillion is currently “23%” complete, as it sits around $2.2 trillion.

Source: Chris BurniskeX

Earlier this month, Burniske he said in an interview with Real Vision CEO Raoul Paul that he has his eye on the Move ecosystem, which was originally built by social media giant Meta and then used to develop layer 1 blockchains Sui (IUE) and Apts (APT).

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Bitcoin

Here’s the next target for BTC before bulls can hold out for $70K

Published

9 months ago

21 July, 2024

SatoshiTimes Staff

Here’s the next target for BTC before bulls can hold out for $70K

Bitcoin’s recovery is going well, and the market is seemingly poised to create a new all-time high in the near term.

Technical analysis

Per NegotiationRage

The daily chart

As the daily chart shows, the price of Bitcoin has been rising since it broke above the 200-day moving average.

The market has also reclaimed the $60K and $65K levels and is moving towards the $68K resistance zone, which could be the last hurdle before creating a new all-time high. With the RSI also indicating that the price has clear bullish momentum, it could be just a matter of time.

Source: TradingView

The 4-hour chart

Looking at the 4-hour chart, it is evident that the price has been rising rapidly since breaking the downtrend line to the upside. The market also broke the $65K resistance level with momentum, turning it into a support.

While almost everything points to a new record high in the coming weeks, there is one worrying sign. The RSI is showing a clear bearish divergence between recent price highs, which could indicate a correction or even a reversal in the near term.

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