“Is the market cycle over?” In the midst of emotion-inducing hype content promising quick riches in the world of cryptocurrencies, how can we tell what kinds of price movements are realistic for the asset class? What are some ways we can value a cryptocurrency based on its previous price action?
To me, crypto doesn’t always have to be a “buy and hope it goes up” kind of investment. I believe that historical movements in price can be an indication of what could theoretically be possible. There is a way to look through the haze to get a sense of where we are in the market cycle, with reference to previous cycles.
Since the inception of Bitcoin in 2009, the cryptocurrency asset class is known to go through various boom and bust cycles, with price declines as much as 80-90% and gains in the thousands as well. The models we are going to discuss is referenced from Benjamin Cowen’s content, though the words and code is originally written by myself.
Bitcoin is 40% of the total cryptocurrency asset class, by studying bitcoins price action, we can have a general sense of the market sentiment on the macroscale.
This project will be presenting three models
- Extension from bitcoin's "fairvalue"
- Market cycle Returns
- Theoretical logarithmic upper and lower bounds of price
Data from quandl: https://data.nasdaq.com/data/BCHAIN/MKPRU-bitcoin-market-price-usd