Sir Isaac Newton's South Sea Bubble Nightmare

In 1720 Isaac Newton had the good fortune to invest early in the South Sea Bubble, making a quick and decent profit. Satisfied with his gains, he exited before the bubble fully inflated. However, as he saw his friends amass incredible wealth, he couldn't resist re-entering the market. In an attempt to make up for lost time, he invested far more—some of it borrowed—and, unfortunately, bought in just before the bubble burst. As the stock plummeted, he lost almost everything, with his investment returning to roughly the value of his initial, smaller stake. It's said that Newton, reflecting on his experience, remarked, "I can calculate the movement of heavenly bodies but not the madness of men."

 

» There is nothing so disturbing to one's well-being and judgment as to see a friend get rich. « 

– Charles P. Kindleberger

 

Sir Isaac reportedly lost the equivalent of $4 to $5 million today, which amounted to almost the entirety of his investment in the South Sea Company. While this was a huge blow to his wealth, it did not leave him destitute, and he still maintained a fortune, though his stake in the company was essentially wiped out, losing around 90% of its value.

Does history make a case that Bitcoin has topped? | Peter L. Brandt

Judge for yourself. It’s called Exponential Decay — and it describes Bitcoin. I hate being the bearer of bad news, but data are data. The fact is that the bull market cycles in Bitcoin have lost a tremendous amount of thrust over the years. You may like the story of this data or not — but you will have to deal with it (or at least account for it, adjust for it or just plain ignore it). In fact, I don’t like the Exponential Decay occurring in Bitcoin — Bitcoin is one of my personal largest investment positions.

There have been four major bull cycles in Bitcoin, with the current advance the fifth major bull cycle [the advance from cycle low to cycle high shown in brackets].

    Dec 21, 2009 to Jun 6, 2011 [3,191X advance]
    Nov 14, 2011 to Nov 25, 2013 [572X advance]
    Aug 17, 2015 to Dec 18, 2017 [ 122X advance]
    Dec 10, 2018 to Nov 8, 2021 [ 22X advance]
    Nov 21, 2022 to xxx x,, yyyy [high so far is $73,835 registered on Mar 14, 2024]

Now, here is where Exponential Decay is showing its ugly head.

    The magnitude of the 2011-2013 was approx. 20% of the 2009-2011 cycle
    The magnitude of the 2015-2017 was approx. 20% of the 2011-2013 cycle
    The magnitude of the 2018-2021 was approx. 20% of the 2015-2017 cycle

Worded another way, 80% of the exponential energy of each successful bull market cycle has been lost. Applied forward, this would indicate that the current bull cycle will experience an an exponential advance of approximately 4.5X or so (80% of the 22X of the 2018-2021 cycle). Taking a low for the current cycle of $15,473 projects a high for this cycle of  $72,723 — guess what — a price that has already been reached.

Well, you will ask, what about the halving? Prices have exploded upwards after every previous halving. And that may happen again. But for now we need to deal with the fact of Exponential Decay. It has happened. It is real. You may not want to believe it, but I place a 25% chance that Bitcoin has already topped for this cycle.

If Bitcoin has topped, what’s next you might ask. Of course I have no clue. But, if Bitcoin has topped I would expect a decline back to the mid-$30s, or the 2021 lows. From a classical charting point of view, such a decline is the most bullish thing that could happen from a long-term view. If you want to see an example of such a chart structure, look at the Gold chart from August 2020 to March 2024.

Do I believe the analysis just presented? I don’t want to, but the data speak for itself.

Quoted from:
Peter L. Brandt (April 26, 2024) - Does history make a case that Bitcoin has topped?

 

 
See also:
Peter L. Brandt (March 9, 2024) - Bitcoin April 2024 Halving - Target 150K+ by October 2025.

Bitcoin weekly high probable by next week | Robert Miner

Any decline should be lasting 6-8 weeks.

 

@BobAtDT (Mar 13, 2024)

 

See also:
Peter L. Brandt (Mar 09, 2024) - Bitcoin April 2024 Halving - Target 150K+ by October 2025.

 

 Nearing the Bitcoin crash? (video)

Bitcoin April 2024 Halving - Target 150K+ by October 2025 | Peter L. Brandt

Bitcoin halvings are strongly associated with past bull market trends in Bitcoin. Also, a strong correlation exists between the halvings and the timing of the associated bull trends. More precisely, in the past the halvings have been right at the half-way point of major bull cycles. In other words, the lengths of bull trends following the halving dates have been about equal to the length of the bull trends prior to the halving dates [...]

 

The 2022 to 2025 Bull Cycle

We know what HAS BEEN in previous bull cycles. We have confidence in what we already know. But projecting past price behavior into the future is highly speculative. The next halving is April 22, 2024. Assuming that the low of the current bull cycle was in late November 2022. That low was 75 weekly bars before the April 2024 halving.
 

If the bull trend extends 75 weekly bars beyond the next halving, a price high would occur in early October 2025. If the pace of the bull trend after April 2024 is at similar pace to the bull trend since the November 2022 low, then the high in October 2025 could be around $150,000. 

 

However, the post-halving advances during previous bull cycles have been much steeper than the pre-halving advances.

 

 

 

Quoted from:
Peter L. Brandt (Feb 14, 2024) - The precocity of bull markets in Bitcoin as associated with halvings.

 

 

Jeffrey A. Hirsch (Feb 28, 2024) @ Twitter/X

 

 Bitcoin Fear And Greed Index (Mar 10, 2024)

Who Owns Bitcoin

BitCoin vs Number of Up Closes (last 30 days) | At or Near Major Low

Three more down closes and the indicator at 10 would fit the pattern.

S&P 500 Index vs BitCoin | shifted 44 Calendar Days

The correlation between Bitcoin prices shifted 44 Calendar Days into the future and the S&P 500 was discovered by Raj Time and Cycles (HERE + HERE). The correlation cycle is not perfect; it contracts and stretches ± 2 calendar days. Currently a 44 calendar day correlation points to a major high in the S&P 500 around April 17 (Tue).

S&P 500 Index vs BitCoin | shifted 42 Calendar Days

See also Raj Time and Cycles: "Looking good Billy Ray!"

Bitcoin Bubble │ Re-Emerging Asian Fever

Source: CryptoCompare BTC/USD Index

Continuing its stellar rise, and adding more than 30% to its value in just a week, on May 25 (Thu) one Bitcoin was worth USD 2,768.32, way over twice as much as one ounce of gold. After crashing more than USD 500 from its intraday highs in less then 9 hours (-18.6%), Bitcoin has bounced back USD 300 off its intraday lows extending gains into what is likely to be another frenetic Asian session. While there are numerous drivers of the recent action, 'scaling' and 'asian fever' are the greatest factors with Japanese and Korean premia exploding.


Bitcoin has risen 170% over the last three months to reach a capitalisation of USD 40 billion according to the CryptoCompare BTC/USD Index, Ethereum too has seen its market capitalisation jump 330% in the past three months to reach USD 20bn according to the CryptoCompare BTC/ETH Index. It is Japan, Korea and Asian interest that is causing the price to rise and dragging up Western prices on the back of regulatory moves as well as scaling. This is the total market capitalization of all cryptocurrencies:  

Source: CryptoCurrency Market Capitalizations

To date that has mostly meant Bitcoin, but over the last two months Bitcoin’s share of cryptocurrency capitalization has actually plummeted to less than 50%, thanks to the sharp rise of Ethereum and Ripple in particular: 

Source: CryptoCurrency Market Capitalizations

This news is the latest bit of good news for the Bitcoin: 

• At the beginning of April, Japan announced Bitcoin had become a legal payment method in the country. 
• Additionally, Ulmart, Russia's largest online retailer, said it would begin accepting Bitcoin even though Russia had said it wouldn't explore the cryptocurrency until 2018. 
• The gains also seem to be boosted by speculation the US Securities and Exchange Commission could overturn its ruling on the Winklevoss twins' Bitcoin exchange-traded fund.  
• And most recently, Fidelity's CEO Abigail Johnson lending some credibility to the crypto-currency, explaning how her firm was mining Bitcoin, and accepting payments in the virtual currency. 
• And finally, as a reminder, it appears Bitcoin is one of the only (un-rigged) assets in the world that is reflective of global policy and geopolitical uncertainty.